GROWTH
ON THE
HORIZON
ANNUAL REPORT 2023
TABLE OF CONTENTS
About Us
2023 Highlights
Letter to Shareholders from the Chair
Letter to Shareholders from the CEO
Environmental, Social and Governance
Management’s Discussion and Analysis
Consolidated Financial Statements
Corporate Information
Board of Directors and ISC Leadership
Corporate Information
3
4
6
7
8
16
64
108
108
109
ABOUT US
Headquartered in Canada, ISC (TSX:ISV) is a leading
provider of registry and information management
services for public data and records. Throughout our
history, we have delivered value to our clients by
providing solutions to manage, secure and administer
information through our Registry Operations, Services
and Technology Solutions segments.
OUR BUSINESS
Registry
Operations
Delivers registry and
information services on
behalf of governments and
private sector organizations
Services
Delivers products and
services that utilize public
records and data to provide
value to customers in the
financial and legal sectors
Technology
Solutions
Provides the development,
delivery and support of
registry (and related)
technology solutions
2023 ISC® Annual Report
3
OVERVIEW
2023 HIGHLIGHTS
$214.5 M
in record revenue
generated
$72.9 M
in record adjusted
EBITDA generated
$50.8 M
in adjusted free
cash flow generated
$16.4 M
in dividends paid out
to shareholders
ACHIEVED
ISO/IEC 27001
certification
COMPLETED
multiple key transactions
in line with our
commitment to
growth, including the
extension of ISC’s MSA
with the province of
Saskatchewan until 2053
4
2023 ISC® Annual Report
OVERVIEW
2023 Financial Results
Revenue
Net income
Adjusted EBITDA1
Adjusted free cash flow1
Earnings per share (basic)
2023 Results
2022 Results
$214.5 M
$25.0 M
$72.9 M
$50.8 M
$1.41
$189.9 M
$30.8 M
$64.4 M
$44.4 M
$1.75
Revenue2 distribution by segment for the year ended December 31,
4%
3%
47%
48%
Registry Operations
Services
Technology Solutions
49%
48%
Registry Operations
Services
Technology Solutions
2023
2022
Consolidated Revenue
for the year ended December 31,
Consolidated EBITDA1 and adjusted EBITDA1
for the year ended December 31,
(CAD millions)
(CAD millions)
72.9
4.4
64.4
3.5
169.4
189.9
214.5
60.9
68.5
+13%
2021
2022
2023
2022
2023
1
Adjusted EBITDA and adjusted free cash flow are not recognized as measures under IFRS and do not have a standardized meaning prescribed by IFRS and, therefore, they may not
be comparable to similar measures reported by other companies; refer to Section 8.8 of the Management’s Discussion and Analysis “Non-IFRS financial measures”. Refer to Section 2
“Consolidated Financial Analysis” for a reconciliation of adjusted EBITDA to net income. Refer to Section 6.1 “Cash flow” for a reconciliation of adjusted free cash flow.
2 Corporate and other and Inter-segment eliminations are excluded. Technology Solutions revenue included in the above chart is third-party revenue. Values may not add due to rounding.
2023 ISC® Annual Report
5
LETTER TO SHAREHOLDERS FROM THE CHAIR
“ It has been 10 years since my first letter to you in our 2013
Annual Report. At that time, we were beginning our journey
as a publicly traded company.”
Some of you may recall that I spoke about the
tremendous foundation provided to us by the then 20-
year Master Service Agreement with the Government of
Saskatchewan. I also noted that your Board of Directors
recognized “the importance of using this foundation as a
platform to protect and improve the future performance
of the Company.”
Since then, I believe that we have done just that. Not
only have we protected the core of the Company while
delivering excellent financial and operational performance
year after year but we have solidified our foundation for
the next generation of stakeholders. In July, we announced
the extension of the Master Service Agreement from
2033 to 2053 in a landmark deal for both the Company
and the Government of Saskatchewan. This achievement,
which is the first to be successfully completed in the
Canadian registry market since ISC secured the initial
MSA in 2013, underscores your Board’s commitment to
registries and their opportunities for sustained growth
and long-term stability.
When we began our journey 10 years ago, ISC had one
line of business and a presence in one Canadian province.
Today, the Company has three lines of business generating
over $200 million in revenue and has more than doubled
in size (based on revenue) over the last 10 years. This
has been achieved through the careful and strategic
deployment of capital in support of our overall growth
strategy. Since 2013, ISC has invested over $200 million
in value-add acquisitions and has paid over $150 million
in dividends to its shareholders, including an increase
to its annual dividend in 2021. The Company’s footprint
has grown beyond Saskatchewan to span Canada with
a presence in Europe along with international business
opportunities.
We are a company with a long-term view and have
always had an eye on the future. With the Extension
Agreement secured, ISC is now a company with an eye on
the very distant future. This means that we can continue
to be prudent with our decision making, knowing that
everything we do must be right for us and ultimately for
our shareholders.
While the Board and I, along with Management, had a
strong focus on completing the Extension Agreement, this
did not mean that we were not attentive to our regular
responsibilities around providing oversight of governance
and strategy. In parallel, Management was also hard at
work thinking beyond the Extension Agreement and
what ISC should be focusing on in the coming years. I
encourage you to read our CEO’s letter to shareholders in
which Shawn Peters, our President and CEO addresses our
strategic intent for the continued growth of ISC.
Like any year at ISC, there has been no shortage of
dedication and commitment from Management. I would
like to congratulate Shawn and his team for putting in
a tremendous shift in 2023 to complete the Extension
Agreement while plotting our course for the immediate
future. I would also like to pay tribute to my fellow Board
members for their steadfast dedication and helping
to steer us along the right path over the years. Ours is
a complex business with complex challenges at times
but with their experience and insight, I believe that we
have the right balance around the Board table to ensure
the sustainability of our journey over the next 10 years
and beyond, always with the goal of delivering value to
shareholders in mind.
Yours sincerely,
Joel Teal
Chair, Board of Directors
6
OVERVIEW2023 ISC® Annual Report LETTER TO SHAREHOLDERS FROM THE CEO
Shawn B. Peters, President and CEO
“ I have been fortunate to have been on the ISC journey
over the last 10 years. As I reflect on that time and all our
accomplishments, one thing is obvious: ISC is a tremendous
business; one which has gotten better and better over time and
one which will get even stronger in the future.”
My letter last year noted that “ISC remains a robust,
diverse and financially exceptional organization fueled
by a strategy for growth and a business that consistently
delivers outstanding results to all our stakeholders.” That
has not changed, nor do I expect it to. Our performance in
2023 is a steadfast demonstration of that, with our record
revenue and record adjusted EBITDA in 2023.
As our Chair noted, in 2023, we secured an extension of
our Master Service Agreement with the Government of
Saskatchewan to 2053, giving us a 30-year exclusive right
to operate the registries. At the same time, we achieved
our ISO 27001 certification, we turned our Technology
Solutions business around with positive EBITDA, we
acquired two new registry contracts with Bank of Canada
and Regulis, and we announced several new contract wins
during the year.
While all of that is impressive, what is truly exciting is what
is ahead of us. Our expectations for 2024 are that we will
continue to grow organically through our existing business
and surpass the records set for 2023. Our original single
line of business, generating just under $80 million per
year in revenue and approximately $34 million per year
in adjusted EBITDA has grown to an expected over $240
million in revenue and over $83 million in adjusted EBITDA
in 2024. And that is just the beginning.
In our Management’s Discussion & Analysis, you will see
that we have updated our strategy, outlining our intent for
meaningful organic growth through our existing business
and further M&A. Notably, this is just an evolution of
our previous strategy. When we completed our IPO in
2013, we had the building blocks to do something special
with ISC. We partnered our strong business with a clear
understanding of the market trends of the time and how
we expected them to unfold in the years to come. And we
executed against that. As a result, over the past 10 years,
we have doubled the size of the company on a revenue
and adjusted EBITDA basis.
As I’ve spoken to various shareholders and potential
investors about growth over the last couple of years, in
2022 and 2023 we deliberately invested in our people
and our technology to be able to scale our growth, all
while achieving record results. With that in place we’ve
outlined our goal for the next 5 years in our updated
strategy, which includes substantial growth. Much of this
will come from our focus on organic growth, especially
from our Services segment, which we started in 2015 and
have spent the last 8 years strengthening the offering and
making us the partner of choice for our customers. The
balance, as you would expect, will be achieved through
targeted M&A, which as you know has been underpinned
by our prudent and proven approach.
As it stands today, and is reflected in our 2024 guidance,
the first year will be driven entirely by organic growth,
mainly from our Services segment, with support from our
Registry Operations and Technology Solutions segments.
This is by design and a reflection of the strength of the
house we have assembled using the building blocks we
had at the start of our journey.
As we move into our next phase of growth, I know that if
it is anything like our last, it will mirror our track record for
consistent performance, but with an increased focus on
growth, which will be to the benefit of all our stakeholders.
I look forward to the journey.
Yours sincerely,
Shawn B. Peters, CPA, CA, ICD.D
President and CEO
7
OVERVIEW2023 ISC® Annual Report2023 ISC® Annual Report
ENVIRONMENTAL, SOCIAL
AND GOVERNANCE
This summary presents information on ISC’s
program (as well as that of its subsidiaries) related
to environmental, social and governance (“ESG”
or the “ESG Program”) interests that impact our
organization and society.
ACTIVITIES
Our ESG approach and strategic intent is reflected in how we manage operations to
positively impact our employees, customers, shareholders and the public. It also provides
a standard for assessing business risks and opportunities.
In 2022, ISC commenced an exploratory review to understand our current practices and
how best to undertake ESG activities, management and reporting in alignment with our
business and stakeholders.
From this work, ISC is transitioning its reporting focus from a Corporate Social Responsibility
(“CSR”) lens to an ESG framework. We continue to monitor evolving compliance and
reporting standards and will comply with regulatory requirements as they emerge.
8
2023 ISC® Annual Report
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
ENVIRONMENTAL
ISC recognizes and embraces our responsibility to manage our activities with care for the
protection of the environment.
As ISC continues to refine its ESG activities, we aim to define how our day-to-day business
and industry are impacting our environment, and how ISC can monitor and manage this
impact. Environment related initiatives at ISC include:
Procurement
Where possible, ISC seeks out suppliers focused on reducing their environmental impact. As part of the procurement
process, ISC asks suppliers to state their environmental considerations and methods undertaken to minimize impact on the
environment through the agreement.
Recycling
PRINTING
MOBILE PHONES
COMPUTERS
Every ISC workplace has
recycling bins, a paper shredder
and a recycling program.
In addition, all locations
participate in a printer toner
recycling program.
In Saskatchewan, ISC mobile
phones procured from SaskTel
are returned to SaskTel after
use and are recycled or
donated through the SaskTel
Phones for a Fresh Start
program.
ISC provides unused computer
equipment to Computers for
Schools Plus (CFS+). For 30 years,
the program has helped extend
the useful life of electronic
equipment and reduce the
environmental impact of
electronic waste across Canada.
Additionally, ERS contributes
electronic equipment, batteries
and other materials after use to a
recycling program conveniently
located within their building.
Research1 demonstrates that protecting our native grasslands is one
of the most effective nature-based solutions available for lessening
the effects of climate change. That is why ISC has partnered with the
Nature Conservancy of Canada (NCC) for nearly 10 years to support
their efforts in conservation while empowering student interns to
gain valuable field experience. In 2023, ISC helped NCC to conserve
82 new projects totalling 163,035 hectares and protecting habitat
for 250 species at risk.
1
Hisey, F., Heppner, M. and Olive, A. (2022), Supporting native grasslands in Canada: Lessons learned and future management of the Prairie Pastures Conservation Area (PPCA)
in Saskatchewan. “The Canadian Geographer / Le Géographe canadien”.
2023 ISC® Annual Report
9
OVERVIEW ENVIRONMENTAL, SOCIAL AND GOVERNANCE
SOCIAL
ISC’s people-first culture supports and unites our employees over a shared passion to
better our communities. This past year, ISC made a renewed commitment to people and
culture initiatives to enhance workforce stability, mental health and engagement, as well
as supporting flexible work arrangements where possible.
We strive to create an environment where each employee is empowered both professionally and personally, and our
community partners are able to expand their reach in ways they haven’t before.
To advance our efforts, we align our social initiatives around three consistent and strategic pillars: Community, Health and
Wellbeing, and Economy.
Through our commitment to uphold equity in the workplace, ISC was
honoured in The Globe and Mail’s 2023 Report on Business Women
Lead Here list for the fourth consecutive year as well as being
recognized as one of Saskatchewan’s Top Employers for the 15th
consecutive year.
$517,062
Total contribution to external
social initiatives
$327,936
Total contribution to internal
social initiatives
$844,998
Total contribution to all social initiatives
53
Total number of
non-profit
organizations and
community initiatives
supported through
donations and
sponsorships
10
2023 ISC® Annual Report
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
Community
For over 20 years, ISC has championed involvement in community outreach initiatives through our historic partnerships as
well as new sponsorships which meet our employees’ needs.
ISC and our employees are donating time, money and talent to causes that matter. Whether lending expertise to local
organizations, participating in neighbourhood food programs or assisting with disaster relief efforts, we believe in making a
positive impact on communities around the world.
For nearly two decades, Reamined has fundraised
for Ernestine’s Women’s Shelter, which provides
crisis intervention and shelter to women, two-spirit,
trans, non-binary and gender diverse individuals
and their children experiencing violence in the
Toronto area.
Last fall, ERS employees ran in the Irish Life Dublin
Half Marathon to raise funds for the Children’s
Health Foundation – Crumlin Children’s Hospital
in support of a colleague whose young daughter
spent several weeks admitted to the hospital.
Following a successful Grey Cup Festival partnership in 2022, ISC
signed an exclusive contract as the Presenting Partner of the
Saskatchewan Roughrider Foundation 50/50 raffle for the 2023 to
2026 seasons. This investment helps to provide an opportunity for
youth to reach their full potential through health, education and
amateur football.
11
2023 ISC® Annual Report ENVIRONMENTAL, SOCIAL AND GOVERNANCE
Health and Wellbeing
Supporting the health and wellbeing of our employees and community members is fundamental to our culture, which is why
in 2023, ISC sponsored or made donations to 53 different charitable organizations and community programs. We will continue
to invest in health organizations, resources and global relief causes to do what is right for our employees and our communities.
In March 2023, there were over 1.9 million visits to
food banks in Canada – a 32 per cent increase from
March 2022. We know that food security is
imperative to the health of our employees,
communities and economy overall, and that is why
in 2023, our employees came together to fundraise
for the Regina and Saskatoon Food Banks,
United Way Regina, Albert Community School
and Toronto’s Daily Bread Food Bank.
Over the last decade, ISC has provided STARS Air
Ambulance with in-kind access to our specialized
data services in addition to monetary donations.
This has made a significant impact in Saskatchewan,
where STARS recently announced its 10,000th
lifesaving mission in December 2023.
Around the world, we look to the Canadian Red Cross in times of
need. ISC has been proud to donate to a number of active responses
over the years, most recently the British Columbia Fires Appeal and
2023 Northwest Territories Fires Appeal, as well as the Earthquake
in Türkiye and Syria Appeal. ISC is also an annual sponsor of the
RED Gala, ensuring that our province can effectively support the
needs of our local communities as well as any domestic or
international operations.
ISC is committed to honouring domestic and internationally accepted labour standards and supports the protection of
human rights of all of its employees and stakeholders. In 2024, we will report under Canada’s Fighting Against Forced Labour
and Child Labour in Supply Chains Act in accordance with the requirements under that Act.
12
2023 ISC® Annual Report
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
Economy
We know that education is a key factor to empower people to do more on their
own and thus make a lasting impact on society. Education broadens opportunities
for personal growth and professional development, and we strive to ensure that
the people around us and our own colleagues can achieve their full potential in
their careers.
As a provider and enabler of corporate registries globally, we have a keen interest in
the success of current and emerging business owners and leaders.
ISC champions our future business leaders of all ages and has become an annual
sponsor of the University of Regina’s JDC West team as well as the First Nations
University of Canada’s Indigenous Youth Entrepreneurship Camp and the
Women Entrepreneurs of Saskatchewan (WESK).
Each summer, ISC hosts a Summer Student Program which gives post-secondary
students the opportunity to gain hands-on experiences in various departments. In
addition to their contributions inside the office, summer students get a chance to
get out and network while giving back to our local community through regular
volunteer days.
Throughout 2023, ISC has endeavoured to procure products and services through
locally owned and operated businesses, including Canadian and Irish small
businesses The Happy Box and Wild Fern; Saskatchewan’s QCGifts.ca and;
Creative Fire, a business strategy and communications enterprise owned by
Des Nedhe Group, the economic development arm of English River First Nation.
The efforts of ISC to move forward with sustainably sourced local businesses is a
first step in the Company’s mission to enhance procurement processes across ISC
and all subsidiaries.
13
2023 ISC® Annual Report ENVIRONMENTAL, SOCIAL AND GOVERNANCE
GOVERNANCE
Our Board plays an important role in providing governance oversight and direction for our
strategy and business affairs. The Board guides ISC to operate as a sustainable business,
to optimize financial returns while effectively managing risk, and to conduct our business
in a way that is transparent and ethical.
Board Composition and Renewal
The Governance and Nominating Committee (“GNC”) reviews
Director competencies annually against a skills matrix to validate
that they continue to meet ISC’s needs. Bi-annually, each Director
completes a self-assessment of their competencies following a
prescribed rating scale and meets with the Board Chair to review
their self-assessment. The GNC reviews the results for consistency
and to confirm that the Directors possess skills in these areas.
Board Diversity
A Board with a mix of diverse skills, backgrounds, experience,
gender and age is important for sound decision making and good
governance. The Board has a formal Diversity Policy, which
includes a set of measurable objectives for achieving diversity on
the Board. Of ISC’s current Directors, three are female (30 per cent
of the total number of Directors).
Business Ethics
Our Code of Conduct (the “Code”) guides how we uphold our
value of integrity. The Code applies to all employees, executives
and members of ISC’s Board and subsidiary Boards. It sets out our
principles and guidelines for ethical behaviour at ISC and with our
shareholders, communities and all stakeholder groups.
Conduct and Ethics Training
Every year, all new and current employees at ISC and its
subsidiaries complete Code of Conduct online training and submit
a declaration statement. The training covers key issues such as
conflicts of interest, fraud prevention, privacy matters, acceptable
gifts and invitations from vendors, respectful workplace matters
and avenues available to raise concerns about ethics matters.
Whistleblower Hotline
Through a third-party service provider, we offer an anonymous
whistleblower hotline that is open to all employees, contractors
and suppliers from across our operations. Information about the
hotline is broadly communicated to employees to let them know
they can communicate any concerns to us in this way. Results of
whistleblower complaints are reported to the Company’s Audit
Committee and the Board.
GOVERNANCE INFORMATION
Ethics
Code of Conduct for Directors,
executives and employees
Securities Trading & Insider
Reporting Policy
Yes
Yes
Board Composition and Independence
Size of Board
Independent Directors
Separate Chair and CEO
Independent Chair (required)
Comprehensive Board
Assessment Process
Directors who are financially
literate
Board meetings held in 2023
Average meeting attendance
Majority Voting Policy
Board Renewal and Diversity
Annual election of Directors
Average age of Directors
10
10
Yes
Yes
Yes
100%
11
99%
Yes
Yes
62
Female Board members
30% (3)
Board Diversity Policy
Board Orientation and
Education Policy
Executive Compensation
Framework
Director Share Ownership
Guidelines
Yes
Yes
Yes
Yes
14
2023 ISC® Annual Report ENVIRONMENTAL, SOCIAL AND GOVERNANCE
Privacy Management
ISC’s privacy management program ensures compliance
with applicable privacy and data protection laws. ISC uses
appropriate security measures, policies, privacy notices,
privacy impact assessments, data flow maps, incident and
breach notification protocols, contract and vendor risk
management and employee training to mitigate risks to
data privacy and integrity.
Cyber Security
As a trusted partner of choice to governments, industries
and communities around the world, data and information
security is at the forefront of everything we do. At the end
of 2023, ISC achieved ISO/IEC 27001 certification across
the enterprise.
ISO/IEC 27001 defines requirements that an information
security management system (“ISMS”) must meet in order
to obtain certification. The ISO/IEC 27001 standard
provides companies of any size and from all sectors of
activity with guidance for establishing, implementing,
maintaining and continually improving an ISMS.
Conformity with ISO/IEC 27001 means that an
organization or business has put in place a system to
manage risks related to the security of data owned or
handled by the company, and that this system respects all
the best practices and principles enshrined in this
International Standard.
ISC successfully completed an audit by third-party firm BSI
Group Canada Inc. to verify that it meets all requirements
of the ISO/IEC 27001 standard.
This achievement reinforces the Company’s commitment
to maintaining the highest levels of information security
and giving customers and clients added confidence in its
products and services.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE PERFORMANCE
15
2023 ISC® Annual Report2023 ISC® Annual Report MD&A
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Fourth Quarter and Year Ended December 31, 2023
1 Overview
2 Consolidated Financial Analysis
3 Business Segment Analysis
18
23
30
4
Summary of Consolidated Quarterly Results 50
5 Business Strategy
6 Financial and Capital Management
7 Business Risks
8
Accounting Policies, Financial Measures
and Controls
51
52
57
58
Introduction
This Management’s Discussion and Analysis (“MD&A”) for
Information Services Corporation (“ISC”) discusses our financial and
operating performance, business indicators and outlook from
management’s viewpoint.
This document should be read in its entirety and is intended to
complement and supplement ISC’s audited consolidated financial
statements for the years ended December 31, 2023, and 2022
(“Financial Statements”). Additional information, including our
Annual Information Form for the year ended December 31, 2023, is
available on the Company’s website at www.isc.ca and in the
Company’s profile on SEDAR+ at www.sedarplus.ca.
This MD&A contains information from the Financial Statements for
the years ended December 31, 2023, 2022 and 2021, prepared in
accordance with International Financial Reporting Standards
(“IFRS”), as issued by the International Accounting Standards Board
(“IAS Board”). The financial information that appears throughout our
MD&A is consistent with the Financial Statements.
This MD&A also includes certain measures which have not been
prepared in accordance with IFRS, such as adjusted net income,
adjusted earnings per share, basic, adjusted earnings per share,
diluted, EBITDA, EBITDA margin, adjusted EBITDA, adjusted
EBITDA margin, free cash flow and adjusted free cash flow. These
measures are provided as additional information to complement
IFRS measures. During the second quarter of 2023, ISC added
adjusted net income, adjusted earnings per share, basic, adjusted
earnings per share, diluted and adjusted free cash flow as new
non-IFRS financial metrics that exclude certain items outside the
normal course of business and are believed to provide useful
information related to ISC’s performance. Refer to Section 8.8 “Non-
IFRS financial measures” for discussion on why we use these
measures and their most closely related IFRS measures within the
Financial Statements. Refer to Section 2 “Consolidated Financial
Analysis” for a reconciliation of adjusted net income, EBITDA and
adjusted EBITDA to net income and Section 6.1 “Cash flow” for a
reconciliation of free cash flow and adjusted free cash flow to net
cash flow provided by operating activities.
Unless otherwise noted, or unless the context indicates otherwise,
“ISC”, the “Company”, “we”, “us” and “our” refer to Information
Services Corporation and its subsidiaries. Any statements in this
MD&A made by, or on behalf of management are made in such
persons’ capacities as officers of ISC and not in their personal
capacities. In this MD&A, this quarter, the quarter, or fourth quarter
refer to the three months ended December 31, 2023, and year-to-
date or year-over-year refer to the year ended December 31, 2023
unless the context indicates otherwise. All results commentary is
16
MANAGEMENT’S DISCUSSION AND ANALYSIS2023 ISC® Annual Report | Management’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2023 Forward-looking information is based on estimates and
assumptions made by us in light of ISC’s experience and perception
of historical trends, current conditions and expected future
developments, as well as other factors that ISC believes are
appropriate and reasonable in the circumstances. There can be no
assurance that such estimates and assumptions will prove to be
correct. Certain assumptions with respect to our ability to
implement our business strategy and compete for business (other
than our exclusive service offerings) and market our technology
assets and capabilities, as well as business, economic, market and
other conditions, availability of financing, currency exchange rates,
consumer confidence, interest rates, level of unemployment,
inflation, liabilities, income taxes and our ability to attract and
retain skilled staff are material factors in preparing forward-
looking information.
Forward-looking information involves known and unknown risks,
uncertainties and other factors that may cause actual results or
events to differ materially from those expressed or implied by such
forward-looking information. Factors that could cause our actual
results or events to differ materially from those expressed or
implied by such forward-looking information include, without
limitation, operational, economic, market, financial, competitive,
regulatory, technological and other risks (including those arising
from public health concerns) detailed from time to time in the
filings made by the Company, including those detailed in our
Annual Information Form for the year ended December 31, 2023,
and the Financial Statements, copies of which are available on our
website at www.isc.ca and in the Company’s profile on SEDAR+ at
www.sedarplus.ca. You should consider these factors carefully. We
caution that the foregoing list is not exhaustive. Other events or
circumstances could cause actual results to differ materially from
those estimated or projected and expressed in, or implied by, this
forward-looking information. See Section 7.2 “Business risks and
risk management”.
Furthermore, unless otherwise stated, the forward-looking
information contained in this MD&A is made as of the date of this
MD&A. We have no intention and undertake no obligation to
update or revise any forward-looking information, whether as a
result of new information, future events or otherwise, except as
required by law. The forward-looking information contained in this
MD&A is expressly qualified by this cautionary statement. You
should not place undue reliance on forward-looking information
contained herein.
compared to the equivalent period in 2022 or as at December 31,
2022, as applicable, unless otherwise indicated.
The Financial Statements are presented in Canadian dollars (“CAD”).
In this MD&A, all references to “$” or “dollars” are to CAD and
amounts are stated in CAD unless otherwise indicated.
This MD&A contains forward-looking information and should
be read in conjunction with the “Caution Regarding Forward-
Looking Information” that follows. This MD&A is current as of
March 12, 2024.
A reference made in this MD&A to other documents or to
information or documents available on a website does not
constitute the incorporation by reference into this MD&A of such
other documents or such other information or documents available
on such website, unless otherwise stated.
Responsibility For Disclosure
The ISC Board of Directors (“Board”) carries out its responsibility for
review of this disclosure primarily through the Audit Committee
(“Audit Committee”) of the Board, which is comprised exclusively of
independent directors.
The Audit Committee reviews the fiscal year-end MD&A and
recommends it to the Board for approval. Interim MD&As are
reviewed and approved by the Audit Committee.
Caution Regarding Forward-Looking Information
Certain statements in this MD&A and certain information
incorporated by reference herein contain forward-looking
information within the meaning of applicable Canadian securities
laws. The purpose of the forward-looking information is to provide a
description of management’s expectations regarding future events
or developments and may not be appropriate for other purposes.
Forward-looking information that may be found in this MD&A
includes, without limitation, that contained in the “Outlook” section
hereof and management’s expectations, intentions, and beliefs
concerning the industries in which we operate, business strategy
and strategic direction, growth opportunities, integration,
contingent consideration, development and completion of projects,
the competitive landscape, seasonality, our future financial position
and results of operations, capital and operating expectations,
projected costs, the impact of certain payments to the Government
of Saskatchewan, access to financing, debt levels, free cash flow,
expectations for meeting future cash requirements, the economy
and the real estate market, reporting currency and currency
fluctuations, dividend expectations, market trends and other plans
and objectives of or involving ISC. The words may, will, would,
should, could, expect, plan, intend, anticipate, believe, estimate,
predict, strive, strategy, continue, likely and potential or the negative
or other variations of these words or other comparable words or
phrases, are intended to identify forward-looking information.
17
MANAGEMENT’S DISCUSSION AND ANALYSISManagement’s Discussion and Analysis | 2023 ISC® Annual ReportFor the Fourth Quarter and Year Ended December 31, 2023 1 Overview
2023 was one of the most significant years in the history of the Company. Securing an extension from the Government of Saskatchewan to
operate the Saskatchewan Registries (as defined in Section 3.1 “Saskatchewan Registries”) until 2053 (the “Extension” or “Extension
Agreement”) marked a milestone for ISC, projecting an estimated $1.3 billion in cash flow through the extended period and an impressive
90 per cent increase in total assets.
This achievement (the first to be successfully completed in the Canadian registry market since ISC secured the initial master service
agreement (the “MSA”) with the Government of Saskatchewan in 2013), underscores the Company’s commitment to registries and the
opportunities for sustained growth and long-term stability they represent.
As part of the Extension, the Company increased its credit facility (the “Credit Facility”) and entered into an amended and restated credit
agreement (the “Amended and Restated Credit Agreement”) to fund the upfront payment (the “Upfront Payment”) to the Government of
Saskatchewan of $150.0 million. More information about our Credit Facility can be found in Section 6.3 “Debt”.
During the year the Company’s expansion continued with the addition of the operational rights for two registries: the Bank of Canada Bank
Act Security Registry and the International Registry of Interests in Rolling Stock. These additions reflect ISC’s strategic move towards
diversification in its expansion of service offerings, enhancing the Company’s presence in key registry sectors.
ISC also attained notable success on the national and international front, securing multiple contracts for its Technology Solutions segment.
Contracts such as the Bank of Canada, the State of Michigan, States of Guernsey and the Department of Registrar of Companies and
Intellectual Property in Cyprus demonstrate the Company’s global reach and reputation for delivering high-quality solutions. The Company’s
Services segment continued to be the driver of organic growth in a market that continues to see strong demand for its solutions.
In line with the focus on high-quality solutions and overall excellence, ISC also achieved ISO/IEC 27001 certification enterprise-wide,
underscoring its dedication to maintaining the highest standards of security and reliability in its operations.
The investments the Company has made in 2023, while still delivering record revenue and record adjusted EBITDA, consistent with
guidance and maintaining robust quarterly cash dividend payments in 2023, has positioned ISC for the next stage of our growth, beginning
in 2024, and underscores the Company’s strong financial performance and dedication to delivering shareholder value.
1.1 Consolidated highlights
SELECT CONSOLIDATED FINANCIAL INFORMATION
Revenue
Net income
$214.5M
+13% vs 2022
$25.0M
(19%) vs 2022
Earnings per share,
diluted
Net cash flow provided
by operating activities
$1.39
(19%) vs 2022
$56.8M
+30% vs 2022
Adjusted net income1
Adjusted EBITDA1
Adjusted free cash flow1
$34.2M
+3% vs 2022
$72.9M
+13% vs 2022
$50.8M
+14% vs 2022
1 Adjusted net income, adjusted EBITDA and adjusted free cash flow are not recognized as measures under IFRS and do not have a standardized meaning prescribed by IFRS
and, therefore, they may not be comparable to similar measures reported by other companies; refer to Section 8.8 “Non-IFRS financial measures”. Refer to Section 2 “Consol-
idated Financial Analysis” for a reconciliation of adjusted net income and adjusted EBITDA to net income. Refer to Section 6.1 “Cash flow” for a reconciliation of adjusted free
cash flow to net cash flow provided by operating activities.
18
MANAGEMENT’S DISCUSSION AND ANALYSIS2023 ISC® Annual Report | Management’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2023 SELECT FINANCIAL INFORMATION
The select quarterly financial information set out for the years ended December 31, 2023, 2022 and 2021, is derived from the Financial
Statements and has been prepared on a consistent basis. In the opinion of the Company’s management, such financial data reflects all
adjustments necessary for a fair presentation of the results for those periods.
(thousands of CAD)
Revenue
Net income
Net cash flow provided by operating activities
Adjusted net income1
Adjusted EBITDA1
Adjusted EBITDA margin (% of revenue)1
Adjusted free cash flow1
Dividend declared per share
Earnings per share, basic
Earnings per share, diluted
Adjusted earnings per share, basic
Adjusted earnings per share, diluted
Total assets
Total non-current liabilities
2023
$ 214,520
25,045
56,771
$ 34,213
72,866
34.0%
$ 50,770
$
0.92
1.41
1.39
1.92
1.90
2023
$ 536,323
$ 304,048
Year Ended December 31,
2021
2022
$ 189,895
30,769
43,536
$ 33,348
64,390
33.9%
$ 44,390
$
0.92
1.75
1.71
1.89
1.86
$ 169,379
32,078
61,212
$ 37,414
67,815
40.0%
$ 47,308
$
0.83
1.83
1.78
2.14
2.08
As at December 31,
2021
2022
$ 283,454
$ 88,240
$ 232,498
$ 57,888
1 Adjusted net income, adjusted earnings per share, basic, adjusted earnings per share, diluted, adjusted EBITDA, adjusted EBITDA margin and adjusted free cash flow are not
recognized as measures under IFRS and do not have a standardized meaning prescribed by IFRS and, therefore, they may not be comparable to similar measures reported by
other companies; refer to Section 8.8 “Non-IFRS financial measures”. Refer to Section 2 “Consolidated Financial Analysis” for a reconciliation of adjusted net income and adjusted
EBITDA to net income. Refer to Section 6.1 “Cash flow” for a reconciliation of adjusted free cash flow to net cash flow provided by operating activities.
ISC has generated strong consolidated results over the past three years through robust organic growth and executing value-add M&A.
Some of the key financial highlights for 2023 were:
• Revenue grew by 13 per cent from $189.9 million in 2022 to a record $214.5 million in 2023 as a result of the following:
– Registry Operations revenue grew by 13 per cent due to fee adjustments made in July associated with the Extension Agreement,
resulting in higher revenue from the Saskatchewan Land Registry accompanied by a full year of revenue compared to seven months in
the prior year from our acquisition of Ontario Property Tax Assessment Services in June 2022.
– Services revenue grew by 10 per cent year-over-year due to customer and transaction growth in the Regulatory Solutions division.
– Technology Solutions revenue grew by 45 per cent year-over-year due to Third Party revenue growth as this segment began to deliver
on new solution definition and implementation contracts announced earlier this year as well as continued to make progress on ongoing
contracts.
• Adjusted EBITDA grew by 13 per cent from $64.4 million in 2022 to a record $72.9 million in 2023 as a result of strong operating results
across Registry Operations, Services and Technology Solutions.
• Net income for the year was $25.0 million, down from $30.8 million in the prior year as strong operating results were offset by increases
in net finance expense and depreciation and amortization costs associated with the Extension Agreement and investments in acquisition,
integration as well as other costs required to support-long term sustainability and growth.
• Adjusted free cash flow increased to a record $50.8 million in 2023, up 14 per cent over the 2022 results, demonstrating the Company’s
continuing ability to generate strong free cash flow.
19
MANAGEMENT’S DISCUSSION AND ANALYSISManagement’s Discussion and Analysis | 2023 ISC® Annual ReportFor the Fourth Quarter and Year Ended December 31, 2023
Consolidated revenue
for the year ended December 31,
(CAD millions)
Consolidated adjusted EBITDA
for the year ended December 31,
(CAD millions)
.
4
9
6
1
2021
.
9
9
8
1
2022
.
5
4
1
2
2023
8
.
7
6
2021
.
4
4
6
2022
.
9
2
7
2023
Consolidated net income
for the year ended December 31,
(CAD millions)
Consolidated adjusted free cash flow
for the year ended December 31,
(CAD millions)
1
.
2
3
2021
.
8
0
3
2022
.
0
5
2
2023
3
.
7
4
2021
.
4
4
4
2022
.
8
0
5
2023
FOURTH QUARTER CONSOLIDATED HIGHLIGHTS
• Revenue was a record $57.5 million for the quarter, an increase
of 25 per cent compared to the fourth quarter of 2022.
Growth was due to fee adjustments implemented in July for
the Saskatchewan Registries in Registry Operations, customer
and transaction growth in Services’ Regulatory Solutions
division and the execution of Third Party solution definition and
implementation contracts in Technology Solutions.
• Net income was $5.7 million or $0.32 per basic and diluted share
compared to $3.9 million or $0.22 per basic and diluted share in
the fourth quarter of 2022. Strong adjusted EBITDA growth in
all operating segments drove the increase in net income during
the quarter. This was partially offset by an increase in costs
associated with the Extension Agreement including increased
borrowings, an increase in interest rates, interest accrued on the
vendor concession liability and amortization of the intangible
asset associated with the Extension.
• Net cash flow provided by operating activities was
$22.2 million for the quarter, a 20 per cent increase from
$18.4 million in the fourth quarter of 2022. This was due to
increased results driven by stronger contributions in all operating
segments, offset by a net increase of $6.0 million in non-cash
working capital, mainly due to changes in accounts payable and
the timing of income tax payments.
• Adjusted net income was $9.8 million or $0.55 per basic
share and $0.54 per diluted share compared to $5.9 million
or $0.34 per basic share and $0.33 per diluted share in the
fourth quarter of 2022. The reason for the increase in adjusted
net income is similar to that regarding net income, with the
exception of the interest accrued on the vendor concession
liability and the amortization related to the intangible asset
associated with the Extension, as these items are excluded from
adjusted net income.
• Adjusted EBITDA was a record $21.3 million for the quarter
compared to $13.5 million in 2022 due to the impact of fee
adjustments in Registry Operations’ Saskatchewan Registries
division and continued customer and transaction growth in
Services’ Regulatory Solutions division. Technology Solutions’
adjusted EBITDA also grew compared to the prior year quarter
due to increased revenue from new solution definition and
20
MANAGEMENT’S DISCUSSION AND ANALYSIS2023 ISC® Annual Report | Management’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2023 implementation contracts announced in 2023 as well as ongoing
contracts. Adjusted EBITDA margin was 37.1 per cent compared
to 29.3 per cent in the fourth quarter of 2022.
• Adjusted free cash flow for the quarter was $14.0 million, up
55 per cent compared to $9.0 million in the fourth quarter of
2022, due to stronger results in our operating segments. This
was partially offset by an increase in costs associated with the
Extension Agreement, including increased borrowings to fund
the Upfront Payment and an increase in interest rates.
• Voluntary prepayments of $10.0 million were made towards
ISC’s Credit Facility during the quarter demonstrating ISC’s
plan to deleverage towards a long-term net leverage target of
2.0x – 2.5x.
• On November 1, 2023, ISC announced a new US$3.2 million
(approximately CAD$4.5 million) contract with the State of
Michigan for a period of five years to be delivered through
its Technology Solutions segment. This contract includes the
delivery of a modern, online Uniform Commercial Code System
using the Company’s RegSys platform to support service
improvement and efficiencies.
• On November 7, 2023, our Board declared a quarterly cash
dividend of $0.23 per Class A Limited Voting Share (“Class A
Share”), payable on or before January 15, 2024, to shareholders
of record as of December 31, 2023.
• On November 20, 2023, ISC announced that the Company,
including its subsidiaries, achieved ISO/IEC 27001 certification.
ISO/IEC 27001 defines requirements that an information security
management system (“ISMS”) must meet in order to obtain
certification. Achieving ISO/IEC 27001 certification is expected
to benefit our current customers as well as help generate new
revenue and adjusted EBITDA growth in the future.
• On December 4, 2023, ISC announced that the Bank of Canada
selected the Company as operator and technology solutions
provider for the Bank Act Security Registry, which enables
security interests to be registered under section 427 of the Bank
Act across Canada. Registry Operations will be responsible for
service delivery related to this new registry with development
and implementation of the technology solution provided by
Technology Solutions.
• On December 11, 2023, ISC announced the appointment
of Jeff Fallowfield as President of ESC Corporate Services
Ltd. with accountability for the Services segment, effective
January 1, 2024.
YEAR-END CONSOLIDATED HIGHLIGHTS
• Revenue was a record $214.5 million for the year ended
December 31, 2023, an increase of 13 per cent compared to
$189.9 million in 2022. This growth was due to the same reasons
given for the quarter accompanied by a full year of revenue from
Ontario Property Tax Assessment Services in the current year
compared to seven months in the prior year.
• Net income was $25.0 million or $1.41 per basic share and
$1.39 per diluted share for the year ended December 31, 2023,
compared to $30.8 million or $1.75 per basic share and $1.71 per
diluted share in 2022. The year-over-year decrease is due to
higher net finance cost, amortization expense, and acquisition,
integration and other costs related to the Extension, and
commencement of registry enhancements (as further discussed
under Section 3.1 “Saskatchewan Registries”) offset by increased
adjusted EBITDA contributions from Registry Operations,
Services and Technology Solutions.
• Net cash flow provided by operating activities was $56.8
million for the year ended December 31, 2023, an increase of
$13.2 million compared to 2022. This was attributable to higher
contributions from all operating segments, augmented by a net
decrease of non-cash working capital of $2.6 million related to
accounts payable and the timing of income tax payments.
• Adjusted net income was $34.2 million or $1.92 per basic share
and $1.90 per diluted share for the year ended December 31,
2023, compared to $33.3 million or $1.89 per basic share and
$1.86 per diluted share for the year ended December 31, 2022.
The year-over-year increase was due to increased contributions
from all operating segments, partially offset by increased interest
expense due to an increase in long-term debt to fund the
Upfront Payment and higher interest rates as compared to the
prior year, which impacted our cost of borrowing.
• Adjusted EBITDA was a record $72.9 million for the year
compared to $64.4 million last year. The increase relates to higher
adjusted EBITDA in Registry Operations from a combination of
fee adjustments implemented in its Saskatchewan Registries
division in July, which offset reduced volume in the Land Registry
(reflecting reduced activity in the Saskatchewan real estate
sector due to a higher interest rate environment) and a full year
of contributions from Ontario Property Tax Assessment Services
in the current year compared to seven months in the prior year.
In addition, Services continued to deliver strong customer and
transaction growth in its Regulatory Solutions division while
Technology Solutions advanced work on both new solution
definition and implementation contracts announced during
the year as well as on ongoing contracts. Partially offsetting this
adjusted EBITDA growth were increased cost of goods sold
associated with the growth in Services’ Regulatory Solutions
division along with increased investment in the Corporate
segment in people and technology. Adjusted EBITDA margin
for the year was 34.0 per cent, consistent with 2022.
• Adjusted free cash flow for the year ended December 31,
2023, was a record $50.8 million, which represented an increase
of $6.4 million compared to $44.4 million in 2022. The increase
was due to stronger results from our operating segments,
partially offset by increased cash interest expense during the
current year due to increased borrowings to fund the Upfront
Payment and an increase in interest rates.
• On July 5, 2023, the Company entered into the Extension
Agreement with the Government of Saskatchewan to extend the
21
MANAGEMENT’S DISCUSSION AND ANALYSISManagement’s Discussion and Analysis | 2023 ISC® Annual ReportFor the Fourth Quarter and Year Ended December 31, 2023 compared to our actual results for 2023, our guidance for 2024
represents expected year-over-year increases of up to 17 per cent
for revenue and up to 25 per cent for adjusted EBITDA.
Our expected performance year-over-year marks the beginning of
the next phase of ISC’s growth plan. We intend to leverage the
investments and achievements of 2023 while intensifying our focus
on organic growth and continuing to execute on accretive M&A
opportunities.
In Registry Operations, we expect transactions in 2024 to be largely
flat with revenue growth through a realization of a full year of fee
adjustments, including those amended in July 2023 because of the
Extension Agreement and regular annual CPI fee adjustments.
Services will continue to be a significant part of our organic growth,
with a forecasted increase in transactions and number of
customers. Our Technology Solutions segment is also forecasted to
see double-digit growth as we deliver on existing and new solutions
delivery contracts in 2024.
The key drivers of expenses in adjusted EBITDA in 2024 are
expected to be wages and salaries and cost of goods sold.
Furthermore, as a result of the Extension Agreement, the Company
will have additional operating costs associated with the
enhancement of the Saskatchewan Registries and increased
interest expense arising from additional borrowings in 2023, which
are excluded from adjusted EBITDA.
Our capital expenditures will also increase because of the
enhancement of the Saskatchewan Registries but will remain
immaterial overall. As a result, the Company expects to see
robust free cash flow in 2024, which will support the deleveraging
of our balance sheet to realize a long-term net leverage target of
2.0x – 2.5x.
term of its exclusive MSA until 2053. The Extension Agreement
extends ISC’s exclusive right to manage and operate the
Saskatchewan Registries. Further details can be found in Section
3.1 “Registry Operations”.
•
In connection with the Extension Agreement, ISC entered into
an Amended and Restated Credit Agreement with its syndicate
of lenders in connection to its Credit Facility, increasing the
amount available under the Credit Facility from $150.0 million to
$250.0 million. Further details can be found in Section 6.3 “Debt”.
• On July 27, 2023, ISC announced that it has expanded the
lenders under the Company’s Credit Facility to include the Bank
of Montreal (“BMO”). The syndicated Credit Facility now includes
the Royal Bank of Canada (“RBC”), the Canadian Imperial Bank of
Commerce (“CIBC”) and BMO.
• Voluntary prepayments on our debt facilities during the year
totalled $39.0 million of which $10.0 million was paid in the
fourth quarter, demonstrating ISC’s commitment to deleverage
its balance sheet towards a long-term net leverage target
of 2.0x – 2.5x. Long-term debt at December 31, 2023 was
$177.3 million.
1.2 Subsequent events
• On February 5, 2024, ISC announced the retirement of Ken
Budzak, Executive Vice President of Registry Operations,
effective May 2024. During this transition period, the Company
will undertake a process to fill the role.
• On March 8, 2024, Regulis S.A. (“Regulis”), a wholly owned
subsidiary of ISC, launched the International Registry of
Interests in Rolling Stock consistent with its contract under
the Luxembourg Rail Protocol of the Cape Town Convention
which provides the exclusive right and obligation to develop,
deliver and operate the International Registry of Interests in
Rolling Stock for a period of 10 years from the date of go live.
Pursuant to our Share Purchase Agreement of Regulis executed
in 2022, additional purchase consideration of €0.6 million
(approximately $0.9 million) has been paid following setting of
the go live target date.
• On March 12, 2024, the Board declared a quarterly cash dividend
of $0.23 per Class A Share, payable on or before April 15, 2024, to
shareholders of record as of March 31, 2024.
1.3 Outlook
The following section includes forward-looking information,
including statements related to our strategy, future results, including
revenue and adjusted EBITDA, segment performance, expenses,
operating costs and capital expenditures, the industries in which we
operate, economic activity, growth opportunities, investments and
business development opportunities. Refer to “Caution Regarding
Forward-Looking Information”.
In 2024, we expect revenue to grow within a range of
$240.0 million to $250.0 million and adjusted EBITDA to
grow within a range of $83.0 million to $91.0 million. When
22
MANAGEMENT’S DISCUSSION AND ANALYSIS2023 ISC® Annual Report | Management’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2023 2 Consolidated Financial Analysis
Revenue for the three months and year ended December 31, 2023, was up 25 and 13 per cent respectively, compared to the same prior year
periods due to growth in all operating segments. Revenue for the quarter primarily grew due to fee adjustments implemented for the
Saskatchewan Registries division in Registry Operations in July, customer and transaction growth in Services’ Regulatory Solutions division and
execution on new and ongoing third-party solution definition and implementation contracts in Technology Solutions. Full year revenue grew for
the same reasons as in the fourth quarter, with the exception of having a full year of Ontario Property Tax Assessment Services division revenue
within Registry Operations compared to only seven months in the prior year.
Net income was up 45 per cent for the three months ended December 31, 2023, and down 19 per cent for the year ended December 31, 2023,
when compared to the same prior year periods. The increase during the quarter compared to the prior year quarter was the result of increased
profitability in all operating segments, partially offset by increased net finance costs and depreciation and amortization related to the Extension.
The year-over-year reduction in net income is due to higher net finance costs, depreciation and amortization, acquisition, integration and other
costs related to the Extension and commencement of registry enhancement (as further discussed under Section 3.1 “Saskatchewan Registries”)
offset by increased adjusted EBITDA contributions from all operating segments.
2.1 Consolidated statements of comprehensive income
Three Months Ended December 31,
2022
2023
Year Ended December 31,
2022
2023
(thousands of CAD)
Revenue
Registry Operations
Services
Technology Solutions
Corporate and other
Total revenue
Expenses
Wages and salaries
Cost of goods sold
Depreciation and amortization
Information technology services
Occupancy costs
Professional and consulting services
Financial services
Other
Total expenses
Net income before items noted below
Finance income (expense)
Interest income
Interest expense
Net finance (expense)
Income before tax
Income tax expense
Net income
Other comprehensive income (loss)
Unrealized gain (loss) on translation of financial
statements of foreign operations
Change in fair value of marketable securities,
net of tax
Other comprehensive income (loss) for the period
Total comprehensive income
$
$ 28,519
25,368
3,604
–
57,491
15,098
13,946
6,643
3,654
1,166
1,522
751
903
43,683
13,808
264
(6,482)
(6,218)
7,590
(1,876)
5,714
104
–
104
5,818
$ 22,605
22,441
1,047
11
46,104
15,997
12,007
4,100
3,205
1,167
1,245
601
1,074
39,396
6,708
269
(1,307)
(1,038)
5,670
(1,721)
3,949
688
–
688
4,637
$
$ 103,516
101,712
9,268
24
214,520
$ 91,721
92,306
5,849
19
189,895
59,999
55,387
20,506
13,280
4,648
5,981
3,077
3,669
166,547
47,973
1,163
(14,346)
(13,183)
34,790
(9,745)
25,045
54,267
49,215
14,735
10,584
4,003
4,988
2,669
3,239
143,700
46,195
463
(3,640)
(3,177)
43,018
(12,249)
30,769
192
(33)
–
192
$ 25,237
11
(22)
$ 30,747
23
MANAGEMENT’S DISCUSSION AND ANALYSISManagement’s Discussion and Analysis | 2023 ISC® Annual ReportFor the Fourth Quarter and Year Ended December 31, 2023
2.2 Consolidated revenue
Consolidated revenue
for the three months ended December 31,
(CAD millions)
57.5
46.1
Consolidated revenue
for the year ended December 31,
(CAD millions)
214.5
189.9
+25%
+13%
2022
2023
2022
2023
(thousands of CAD)
Registry Operations
Services
Technology Solutions
Corporate and other
Total revenue
Three Months Ended December 31,
2022
2023
Year Ended December 31,
2022
2023
$ 28,519
25,368
3,604
–
$ 57,491
$ 22,605
22,441
1,047
11
$ 46,104
$ 103,516
101,712
9,268
24
$ 214,520
$ 91,721
92,306
5,849
19
$ 189,895
Total revenue increased during the quarter by $11.4 million compared to the prior year quarter as a result of:
•
Increased revenue in Registry Operations of $5.9 million, or 26 per cent, compared to the fourth quarter of 2022 following the
implementation of fee adjustments in the third quarter in the Saskatchewan Land Registry.
• A revenue increase of $2.9 million in Services, or 13 per cent, for the fourth quarter of 2023 compared to the same period in 2022.
Growth was driven by continued customer and transaction growth in the Regulatory Solutions division where financial institutions and
equipment and auto finance customers continued to enhance due diligence processes in an environment of higher interest rates and
increased regulatory oversight.
•
Increased Third Party revenue of $2.6 million in Technology Solutions compared to the fourth quarter of 2022, as revenue continues to
be recognized for new contracts announced in 2023 accompanied by revenue recognized for other ongoing contracts.
Total revenue for the year increased by $24.6 million or 13 per cent compared to the prior year, again mainly due to:
•
•
•
Increased revenue of $11.8 million, or 13 per cent, in Registry Operations compared to the prior year. Growth was due to a combination of
fee adjustments made in the third quarter of 2023, resulting in higher revenue from the Saskatchewan Registries division, accompanied
by $6.7 million in incremental revenue earned for the full year from the Ontario Property Tax Assessment Services division compared to
seven months in the prior year when it was acquired.
Increased revenue of $9.4 million, or 10 per cent, in Services driven primarily by customer and transaction growth in the Regulatory
Solutions division as outlined in the quarterly results above.
Increased Third Party revenue of $3.4 million, or 58 per cent, in Technology Solutions due to progress during the year on both new and
ongoing solution definition and implementation contracts.
24
MANAGEMENT’S DISCUSSION AND ANALYSIS2023 ISC® Annual Report | Management’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2023
2.3 Consolidated expenses
Consolidated expenses
for the three months ended December 31,
(CAD millions)
Consolidated expenses
for the year ended December 31,
(CAD millions)
39.4
19%
30%
10%
43.7
18%
32%
15%
41%
35%
2022
2023
Other
Costs of goods sold
Depreciation and amortization
Employee expenses
166.5
18%
33%
12%
36%
143.7
18%
34%
10%
38%
2022
2023
Other
Costs of goods sold
Depreciation and amortization
Employee expenses
Note: Values in tables may not add due to rounding.
(thousands of CAD)
Wages and salaries
Cost of goods sold
Depreciation and amortization
Information technology services
Occupancy costs
Professional and consulting services
Financial services
Other
Total expenses
Three Months Ended December 31,
2022
2023
Year Ended December 31,
2022
2023
$ 15,098
13,946
6,643
3,654
1,166
1,522
751
903
$ 43,683
$ 15,997
12,007
4,100
3,205
1,167
1,245
601
1,074
$ 39,396
$ 59,999
55,387
20,506
13,280
4,648
5,981
3,077
3,669
$ 166,547
$ 54,267
49,215
14,735
10,584
4,003
4,988
2,669
3,239
$ 143,700
Expenses were $43.7 million for the quarter, an increase of $4.3 million compared to the same quarter last year. The increase in the quarter
was due to:
• An increase in depreciation and amortization of $2.5 million related to amortization of the intangible asset associated with the right to
manage and operate the Saskatchewan Registries, which was capitalized in July.
• An increase in cost of goods sold of $1.9 million related to the increase in Services revenue within the Regulatory Solutions division.
•
Increased information technology costs of $0.4 million related to project delivery work in Technology Solutions.
• An increase in professional and consulting services of $0.3 million driven by increased acquisition, integration and other costs related to
the Extension Agreement and registry enhancements.
Increases were offset by a decrease in wages and salaries of $0.9 million when compared to the prior year quarter. This relates to a $1.9
million decrease in share-based compensation expense and a $1.0 million increase in investment in people to support execution on
Technology Solutions contracts and additional capacity in Corporate to support growth priorities.
The year-over-year rise in expenses for the year ended December 31, 2023, was $22.8 million. This was driven by the same factors outlined
for the quarter, accompanied by a full year of expenses for the operations of acquisitions made in the prior year reported within Services
and Registry Operations in February and June 2022, respectively.
25
MANAGEMENT’S DISCUSSION AND ANALYSISManagement’s Discussion and Analysis | 2023 ISC® Annual ReportFor the Fourth Quarter and Year Ended December 31, 2023
2.4 Consolidated net income and adjusted net income
Net income and adjusted net income
for the three months ended December 31,
(CAD millions)
Net income and adjusted net income
for the year ended December 31,
(CAD millions)
9.8
4.1
Adjustments
Net income
5.7
+66%
5.9
2.0
3.9
33.3
2.6
34.2
9.2
30.8
25.0
Adjustments
Net income
+3%
2022
2023
Note: Values in tables may not add due to rounding.
2022
2023
(thousands of CAD)
2023
2022
2023
2022
2023
2022
Three Months Ended December 31,
Pre-tax
Tax1
After-tax
$ 13,253
$ 8,401
$ (3,405)
$
(2,459)
$ 9,848
$
5,942
Adjusted net income
Add (subtract):
Share-based compensation (expense)
Acquisition, integration and other costs
Effective interest component of
interest expense
Interest on vendor concession liability
Amortization of right to manage and
operate the Saskatchewan Registries
Net income
1 Calculated at ISC’s statutory tax rate of 27.0 per cent.
(307)
(559)
(2,180)
(533)
(64)
(2,599)
(18)
–
83
151
17
702
589
144
(224)
(408)
5
–
(47)
(1,897)
(1,591)
(389)
(13)
–
(2,134)
$ 7,590
–
$ 5,670
576
$ (1,876)
–
(1,721)
$
(1,558)
$ 5,714
–
3,949
$
(thousands of CAD)
2023
2022
2023
2022
2023
2022
Year Ended December 31,
Pre-tax
Tax1
After-tax
$ 47,350
$ 46,550
$ (13,137)
$ (13,202)
$ 34,213
$ 33,348
(283)
(4,104)
(1,483)
(1,977)
76
1,108
400
534
(207)
(2,996)
(165)
(4,332)
(72)
–
45
1,170
19
–
(120)
(3,162)
(1,083)
(1,443)
(53)
–
(3,676)
$ 34,790
–
$ 43,018
993
$ (9,745)
–
$ (12,249)
(2,683)
$ 25,045
–
$ 30,769
Adjusted net income
Add (subtract):
Share-based compensation (expense)
Acquisition, integration and other costs
Effective interest component of
interest expense
Interest on vendor concession liability
Amortization of right to manage and
operate the Saskatchewan Registries
Net income
1 Calculated at ISC’s statutory tax rate of 27.0 per cent.
26
MANAGEMENT’S DISCUSSION AND ANALYSIS2023 ISC® Annual Report | Management’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2023
Earnings per share, basic
Earnings per share, diluted
Adjusted earnings per share, basic
Adjusted earnings per share, diluted
Weighted average # of shares
Weighted average # of diluted shares
Three Months Ended December 31,
2022
2023
Year Ended December 31,
2022
2023
$
0.32
0.32
0.55
0.54
18,004,641
18,130,264
$
0.22
0.22
0.34
0.33
17,701,498
18,012,223
$
1.41
1.39
1.92
1.90
17,820,729
18,023,777
$
1.75
1.71
1.89
1.86
17,598,864
17,949,493
Net income for the quarter was $5.7 million or $0.32 per basic and diluted share compared to $3.9 million or $0.22 per basic and diluted
share in the fourth quarter of 2022 and was $25.0 million or $1.41 per basic share and $1.39 per diluted share in 2023 compared to $30.8
million or $1.75 per basic share and $1.71 per diluted share last year.
The increase in net income for the three months ended December 31, 2023, compared to the prior year period was due to:
• Strong adjusted EBITDA growth of $5.5 million in Registry Operations following the implementation of fee adjustments in July 2023
coupled with Technology Solutions generating $3.2 million more in adjusted EBITDA when compared to the prior year quarter. The
increase in Technology Solutions was due to revenue recognized on new contracts announced in the first quarter of 2023. Services also
continued to be a strong contributor to adjusted EBITDA.
• A decrease in share-based compensation expense of $1.9 million compared to the prior year quarter driven by a smaller increase in the
Company’s share price during the current year quarter compared to the previous year quarter.
Partially offsetting these items were:
• An increase in net finance expense from $1.0 million in the comparative quarter to $6.2 million during the three months ended December
31, 2023 due to a combination of increased borrowings associated with the Upfront Payment of $150.0 million that was made in the
third quarter in connection with the Extension Agreement, an increase in interest rates and non-cash interest accrued on the vendor
concession liability to the Government of Saskatchewan of $2.6 million.
•
Increased depreciation and amortization expense of $2.5 million due to a full quarter of amortization with respect to the extended right
to manage and operate the Saskatchewan Registries, which was capitalized in July.
For the full year, the decrease in net income from $30.8 million in the prior year to $25.0 million in the current year related to:
•
Increased net finance costs and depreciation and amortization expense of $10.0 million and $5.8 million, respectively. The increase in
net finance expense relates to a combination of additional borrowings to fund the Upfront Payment for the Extension Agreement, an
increase in interest rates and non-cash interest accrued on the vendor concession liability to the Government of Saskatchewan. The
increased depreciation and amortization expense relates to five months of amortization of the extended right to manage and operate
the Saskatchewan Registries under the Extension.
Partially offsetting these items was:
•
Increased adjusted EBITDA contributions across Registry Operations, Services and Technology Solutions.
Adjusted net income for the quarter was $9.8 million or $0.55 per basic share and $0.54 per diluted share, an increase compared to $5.9
million in the comparative quarter last year or $0.34 per basic share and $0.33 per diluted share. For the year, adjusted net income was
$34.2 million or $1.92 per basic share and $1.90 per diluted share compared to adjusted net income of $33.3 million or $1.89 per basic share
and $1.86 per diluted share.
The increase in adjusted net income for the fourth quarter of 2023 compared to the prior year was due to increased adjusted EBITDA
contributions from Registry Operations, Services and Technology Solutions discussed above, partially offset by increased interest expense
due to increased borrowings and an increase in interest rates.
Adjusted net income for the year increased by $0.9 million resulting from higher year-over-year adjusted EBITDA contributions from all
operating segments, offset by higher interest expense on long-term debt associated with the Extension and higher interest rates impacting
our cost of borrowing as compared to the prior year.
27
MANAGEMENT’S DISCUSSION AND ANALYSISManagement’s Discussion and Analysis | 2023 ISC® Annual ReportFor the Fourth Quarter and Year Ended December 31, 2023
2.5 Consolidated EBITDA and adjusted EBITDA
Consolidated EBITDA and adjusted EBITDA
for the three months ended December 31,
(CAD millions)
Consolidated EBITDA and adjusted EBITDA
for the year ended December 31,
(CAD millions)
21.3
0.9
20.5
13.5
2.7
10.8
Adjustments
EBITDA
+58%
72.9
4.4
64.4
3.5
68.5
60.9
Adjustments
EBITDA
+13%
2022
2023
Note: Values in tables may not add due to rounding.
2022
2023
(thousands of CAD)
Adjusted EBITDA
Add (subtract):
Share-based compensation (expense)
Acquisition, integration and other costs
EBITDA1
Add (subtract):
Depreciation and amortization
Net finance expense
Income tax expense
Net income
EBITDA margin (% of revenue)1
Adjusted EBITDA margin (% of revenue)
Three Months Ended December 31,
2022
2023
Year Ended December 31,
2022
2023
$ 21,317
$ 13,521
$ 72,866
$ 64,390
(307)
(559)
$ 20,451
(2,180)
(533)
$ 10,808
(6,643)
(6,218)
(1,876)
5,714
35.6%
37.1%
$
(4,100)
(1,038)
(1,721)
3,949
23.4%
29.3%
$
(283)
(4,104)
$ 68,479
(20,506)
(13,183)
(9,745)
$ 25,045
31.9%
34.0%
(1,483)
(1,977)
$ 60,930
(14,735)
(3,177)
(12,249)
$ 30,769
32.1%
33.9%
1 EBITDA and EBITDA margin are not recognized as measures under IFRS and do not have a standardized meaning prescribed by IFRS and therefore, they may not be
comparable to similar measures reported by other companies; refer to Section 8.8 “Non-IFRS financial measures”.
Adjusted EBITDA for the fourth quarter was $21.3 million, an increase of $7.8 million or 58 per cent from $13.5 million in the fourth quarter of
2022 due to:
• An increase in adjusted EBITDA in Registry Operations for the fourth quarter of $5.5 million when compared to the same quarter of
2022. The increase was due to a full quarter of fee adjustments implemented in the third quarter in the Saskatchewan Registries division
pursuant to the Extension Agreement.
• An increase in adjusted EBITDA in Services of $0.4 million, or 9 per cent, compared to the fourth quarter of 2022. The increase resulted
from customer and transaction growth in the Regulatory Solutions division. This was partially offset by increased cost of goods sold and
investments in technology.
• Technology Solutions advancing delivery on both new solution definition and implementation contracts announced during the year as
well as ongoing contracts and related party projects. This translated into $3.2 million in growth in adjusted EBITDA, compared to the
fourth quarter of 2022.
28
MANAGEMENT’S DISCUSSION AND ANALYSIS2023 ISC® Annual Report | Management’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2023
For 2023, adjusted EBITDA was $72.9 million, an increase of $8.5 million, or 13 per cent, compared to $64.4 million in 2022. This was mainly
due to:
•
Increased adjusted EBITDA in Registry Operations of $6.9 million when compared to the prior year. The increase resulted from a
combination of fee adjustments implemented in July in the Saskatchewan Registries division and a full year of contributions from the
Ontario Property Tax Assessment Services division in the current year compared to seven months in the prior year.
• Growth in Services’ adjusted EBITDA of $2.1 million, or 11 per cent, compared to the prior year. The increase resulted from customer and
transaction growth in Regulatory Solutions partially offset by increased cost of goods sold and increased investments in technology.
•
Increased adjusted EBITDA in Technology Solutions of $2.1 million when compared to the prior year for the same reasons as described
above for the quarter.
These factors were offset by a reduction of $1.1 million in Corporate adjusted EBITDA due to an increased investment in people and technology
to support ISC’s continued focus on growth initiatives.
Adjusted EBITDA margin for the quarter grew when compared to the prior year from 29.3 per cent to 37.1 per cent. The increase for the
quarter was due to the implementation of fee adjustments in the Saskatchewan Registries division in July, consistent year-over-year adjusted
EBITDA margin in Services, as well as increased profitability in Technology Solutions following progress on both third-party contracts and
related party projects.
The adjusted EBITDA margin for the year was 34.0 per cent, consistent with the margin in the prior year. The adjusted EBITDA margin for the
year reflects lower year-over-year transaction volume within the Land Registry, most noticeably in the first half of 2023, when compared to the
first half of 2022, which impacted revenue in that period, offset by fee adjustments implemented in July 2023.
2.6 Consolidated net finance expense
(thousands of CAD)
Three Months Ended December 31,
2022
2023
Year Ended December 31,
2022
2023
Interest income
Interest expense on long-term debt
Interest on vendor concession liability
Interest on lease liabilities
Effective interest component of interest expense
Interest expense
Net finance expense
$
$
$
$
264
(3,696)
(2,599)
(123)
(64)
(6,482)
(6,218)
$
$
$
$
269
(1,188)
–
(101)
(18)
(1,307)
(1,038)
$
$
1,163
(9,449)
(4,332)
(400)
(165)
$ (14,346)
$ (13,183)
$
$
$
$
463
(3,165)
–
(403)
(72)
(3,640)
(3,177)
Note: Brackets in the above table denote expense
Net finance expense was $6.2 million for the quarter, up $5.2 million from the prior year. For the year, net finance expense was $13.2 million
in 2023, up compared to $3.2 million in 2022.
Net finance expense for the quarter and the year was higher due to higher interest expense as a result of:
• Higher average long-term debt outstanding in 2023 as compared to 2022 due to the draw down of the Credit Facility to fund the Upfront
Payment.
•
Increased interest expense due to higher interest rates impacting our cost of borrowing on long-term debt outstanding following
successive interest rate increases by the Bank of Canada commencing in the first quarter of 2022 through July 2023.
• Non-cash interest on the vendor concession liability to the Government of Saskatchewan related to the Extension Agreement which
requires ISC to make five annual cash payments of $30.0 million per year, commencing in July 2024.
29
MANAGEMENT’S DISCUSSION AND ANALYSISManagement’s Discussion and Analysis | 2023 ISC® Annual ReportFor the Fourth Quarter and Year Ended December 31, 2023
2.7 Tax provision
The Company is subject to federal and provincial income taxes at an estimated combined statutory rate of 27.0 per cent (2022 – 27.0 per
cent). Income tax expense varies from the amounts that would be calculated by applying the statutory income tax rate to earnings before
taxes as outlined below:
(thousands of CAD)
2023
2022
Net income before tax
Combined statutory income tax rate
Expected income tax expense
Increase (decrease) in income tax resulting from:
Non-deductible expenses
Foreign income tax differential
Adjustment to prior years’ deferred tax assets and liabilities
Other
Income tax expense
$ 34,790
27.0%
9,393
223
19
(3)
113
$ 9,745
$ 43,018
27.0%
11,615
162
488
(6)
(10)
$ 12,249
In assessing the recovery of deferred income tax assets, management considers whether it is probable that the deferred income tax assets
will be realized. The recognition and measurement of the current and deferred income tax assets and liabilities involve dealing with
uncertainties in the application of complex tax regulations and the assessment of the recoverability of the deferred income tax assets. The
ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which
the temporary differences are deductible.
3 Business Segment Analysis
Headquartered in Canada, ISC is a leading provider of registry and information management services for public data and records.
Throughout our history, we have delivered value to our customers by providing solutions to manage, secure and administer information.
ISC currently has three operating segments:
Registry Operations delivers
registry and information services on
behalf of governments and private
sector organizations.
Services delivers products and
services that utilize public records
and data to provide value to
customers in the financial and
legal sectors.
Technology Solutions provides
the development, delivery and
support of registry (and related)
technology solutions.
The balance of our corporate activities and shared services are reported as Corporate and other.
Revenue by segment1
for the three months ended December 31,
6%
44%
Technology Solutions
Services
Registry Operations
2%
6%
49%
49%
Revenue by segment1
for the year ended December 31,
4%
3%
47%
49%
Technology Solutions
Services
Registry Operations
50%
+25%
48%
48%
+13%
2022
2023
2022
2023
1 Corporate and other and Inter-segment eliminations are excluded. Technology Solutions revenue included in the above graphs is Third Party revenue.
Values may not add due to rounding.
30
MANAGEMENT’S DISCUSSION AND ANALYSIS2023 ISC® Annual Report | Management’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2023
Adjusted EBITDA by segment1
for the three months ended December 31,
Adjusted EBITDA by segment1
for the year ended December 31,
9%
19%
72%
28%
79%
Technology solutions
Services
Registry operations
+61%
1%
26%
27%
Technology Solutions
Services
Registry Operations
75%
73%
+16%
(7)%
2022
2023
(2)%
2022
2023
1 Corporate and other and Inter-segment eliminations are excluded. Values may not add due to rounding.
3.1 Registry Operations
Our Registry Operations segment delivers registry and information services on behalf of governments and private sector organizations. This
segment currently has two major clients: the Government of Saskatchewan and the Government of Ontario.
Our offerings are categorized into two divisions: Saskatchewan Registries and Ontario Property Tax Assessment Services.
For services in this segment, competitors include infrastructure funds and private equity firms as well as information services companies,
registry software providers and other such information-based companies that develop and provide software platforms to manage
registry and related information services. These types of companies may compete with ISC by acting as, or partnering with, businesses
that can provide other required processes, such as customer service and delivery, in conjunction with software platforms to provide
full-service solutions.
Saskatchewan Registries
ISC provides services on behalf of the Government of Saskatchewan under the amended and restated Master Service Agreement (the
“Amended and Restated MSA”) in effect until 2053 and is the exclusive full-service solution provider of the Saskatchewan Land Registry
(including the Saskatchewan Land Titles Registry (“Land Titles Registry”), the Saskatchewan Land Surveys Directory (“Land Surveys”) and
Saskatchewan Geomatics services (“Geomatics”), collectively the “Land Registry”), the Saskatchewan Personal Property Registry (“Personal
Property Registry”) and the Saskatchewan Corporate Registry (“Corporate Registry”) (collectively, the “Saskatchewan Registries”).
On July 5, 2023, the Company entered into the Extension Agreement to extend ISC’s exclusive right to manage and operate the
Saskatchewan Registries until 2053. Under the Extension Agreement, ISC was granted the right to introduce and/or enhance fees on certain
transactions. Applicable fee adjustments became effective July 29, 2023.
The Amended and Restated MSA implemented certain incremental terms and conditions, the objectives of which are to enhance security
features and protocols for the Saskatchewan Registries; contemplate emerging and future technology enhancements for the Saskatchewan
Registries and the services provided pursuant to the Amended and Restated MSA; refresh and clarify governance practices and structure;
adjust the registry fees chargeable by the Company; and provide flexibility for change over the life of the extended term. Certain costs
associated with the Extension along with a portion of the transaction costs associated with the Extension have been capitalized as an
intangible asset related to the right to manage and operate the Saskatchewan Registries, while the remainder of the costs have been
expensed pursuant to IFRS.
The consideration paid and to be paid by ISC to the Government of Saskatchewan with respect to the Extension consists of:
• the Upfront Payment of $150.0 million, paid in July 2023;
• five cash payments of $30.0 million per year, totalling $150.0 million, commencing in July 2024 with the final payment expected to be
made in 2028 (the “Subsequent Payments”); and
31
MANAGEMENT’S DISCUSSION AND ANALYSISManagement’s Discussion and Analysis | 2023 ISC® Annual ReportFor the Fourth Quarter and Year Ended December 31, 2023 • annual contingent payments potentially payable after 2033 if
cumulative annual volume growth for certain Saskatchewan
Land Registry transactions falls within a pre-determined range,
calculated in any given year as follows:
– 25 per cent of any revenue associated with long-term volume
growth between 0 per cent to 1 per cent;
– 50 per cent of any revenue associated with long-term volume
growth between 1 per cent to 3 per cent;
mapping system. Revenue related to all Land Survey services is
earned as a flat fee per transaction.
Geomatics manages geographic data related to the cadastral parcel
mapping system, which is integrated with the Land Titles Registry
and Land Surveys. Fees for Geomatics services are typically
negotiated per transaction, based on the type and nature of
services required.
– ISC to retain unlimited upside on any incremental volume
Saskatchewan Personal Property Registry
growth in excess of 3 per cent.
ISC has commenced enhancement of the Saskatchewan Registries
(also referred to as registry enhancements), leveraging ISC-owned
technology to offer a best-in-class technology, security and user
experience. In accordance with IFRS, these expenditures will be
capitalized as intangible assets or expensed.
Additional information about the Amended and Restated MSA is
available on our website at www.isc.ca and in the Company’s
profile on SEDAR+ at www.sedarplus.ca.
Our Saskatchewan Registries division experiences moderate
seasonality, primarily because Land Titles Registry revenue
fluctuates in line with real estate transaction activity in
Saskatchewan. Typically, the second and third quarters of the fiscal
year generate higher revenue, as that is when real estate activity is
traditionally highest.
Saskatchewan Land Registry
The Land Titles Registry issues titles to land and registers
transactions affecting titles, including changes of ownership and the
registration of interests in land, in Saskatchewan.
Revenue for the Land Titles Registry is earned through registration,
search and maintenance fees. Registration fees are either flat or
value-based, calculated as a percentage of the value of the land
and/or property being registered.
We typically charge a flat fee per transaction for search and
maintenance transactions. However, in certain instances, we may
charge a negotiated fee for a customized search or maintenance
transaction such as certain mineral certification or bulk data
requests.
Because Land Titles Registry revenue comprises both residential
and non-residential activity, mortgage rates and business lending
rates may affect revenue. Changes in land values, provincial
population and mortgage qualifying requirements also affect the
housing market, which, in turn, influences changes of ownership
and revenue.
Approximately 89 per cent of all Land Titles Registry registration
transactions were submitted online in 2023.
Land Surveys registers land survey plans and creates a
representation of Saskatchewan land parcels in the cadastral parcel
The Personal Property Registry is a notice-based public registry in
which security interests and certain other interests in personal
property (property other than land, buildings and other property
affixed to land) may be registered.
Customers are charged flat fees per transaction and the automated
web-based system enables real-time completion of search and
registration services as well as minimizes operational effort to
deliver services.
General provincial economic drivers, including vehicle sales, interest
rates and the strength of commercial activity across the province,
influence revenue in the Personal Property Registry.
Customers complete almost all searches in the registry online. High
online usage is stable, with minimal numbers of end-use consumers
needing staff assistance to complete their transactions.
Saskatchewan Corporate Registry
The Corporate Registry is a province-wide system for the
registration of business entities, including business corporations,
non-profit corporations, co-operatives, sole proprietorships,
partnerships and business names.
Unlike other registries, the Corporate Registry earns most of its
revenue from maintenance services, including annual returns and
changes to corporate articles, ownership or directorship.
Approximately 95 per cent of all registrations in the Corporate
Registry were submitted online in 2023.
Ontario Property Tax Assessment Services
ISC also has an exclusive agreement with the Government of
Ontario (the ”OPTA Agreement”) by which Ontario Property Tax
Assessment Services provides online property tax analysis services
to over 440 municipalities in Ontario, facilitating the management
of property tax rates and distribution.
Reamined Systems Inc. (“Reamined”), which operates as the Ontario
Property Tax Assessment Services division of Registry Operations,
has provided these services to the Government of Ontario for over
25 years and, on a regular basis, has negotiated and typically
renewed up to five-year agreements with the government. The
current agreement expires in 2025. These services support critical
applications of information used by municipalities to facilitate the
annual determination of property taxes.
32
MANAGEMENT’S DISCUSSION AND ANALYSIS2023 ISC® Annual Report | Management’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2023 Total revenue for each year of the agreement is determined at the time of renewal and is paid monthly by the Government of Ontario to
Ontario Property Tax Assessment Services. Should the government request any change orders during the term of the contract, the revenue
from any order is based on the scope of work agreed to by the parties and is in addition to regular revenue. Ontario Property Tax
Assessment Services does not experience seasonality, as revenue is spread evenly throughout the year under the agreement with the
Government of Ontario.
The majority of business is conducted online.
REGISTRY OPERATIONS REVENUE
Registry Operations revenue
for the three months ended December 31,
(CAD millions)
28.5
14%
11%
10%
65%
22.6
17%
12%
12%
58%
Other
Property Tax Services
Corporate Registry
Personal Property Registry
Land Registry
+26%
2022
2023
Note: Values may not add due to rounding.
(thousands of CAD)
Land Registry
Personal Property Registry
Corporate Registry
Property Tax Assessment Services
Other
Registry Operations revenue
Registry Operations revenue
for the year ended December 31,
(CAD millions)
103.5
15%
12%
11%
91.7
10%
12%
12%
Other
Property Tax Services
Corporate Registry
Personal Property Registry
Land Registry
65%
61%
+13%
2022
2023
Three Months Ended December 31,
2022
2023
Year Ended December 31,
2022
2023
$ 18,501
2,885
3,163
3,970
–
$ 28,519
$ 13,062
2,699
2,787
3,814
243
$ 22,605
$ 63,525
11,879
11,979
15,545
588
$ 103,516
$ 59,310
11,337
11,221
8,856
997
$ 91,721
Revenue for Registry Operations for the quarter was $28.5 million, up $5.9 million or 26 per cent compared to the fourth quarter of 2022.
The primary reason for the increase is due to fee adjustments in the Saskatchewan Registries made in the third quarter pursuant to the
Extension and as part of the annual review of registry fees related to Saskatchewan CPI which resulted in higher revenue in the Land
Registry and Corporate Registry.
For the year, revenue was $103.5 million compared to $91.7 million in
2022, an increase of $11.8 million or 13 per cent. The increase was due
to a full 12 months of revenue from Ontario Property Tax Assessment
Services in the current year compared to seven months in the prior
year and fee adjustments described above in the explanation for the
quarter. The increase in Saskatchewan Registries revenue was
partially offset by a reduction in Saskatchewan Land Registry
transaction volume year-over-year due to reduced activity in the
Saskatchewan real estate sector, particularly in the first half of the
year, following the impact of successive interest rate increases by the
Bank of Canada that commenced in the first quarter of 2022 and
continued until mid-2023.
Registry Operations revenue
for the year ended December 31,
(CAD millions)
Land Registry
Personal Property Registry
Corporate Registry
Property Tax Services
Other
85.6
11.2
11.0
63.1
91.7
8.9
11.2
11.3
59.3
103.5
15.5
12.0
11.9
63.5
2021
2022
2023
33
MANAGEMENT’S DISCUSSION AND ANALYSISManagement’s Discussion and Analysis | 2023 ISC® Annual ReportFor the Fourth Quarter and Year Ended December 31, 2023
The top five customers for the Saskatchewan Registries made up 20 per cent of total division revenue in 2023. Of those customers, no
single customer accounted for more than 10 per cent of total Saskatchewan Registries revenue. The Ontario Property Tax Assessment
Services division earns its revenue from the Government of Ontario.
Saskatchewan Land Registry
For the fourth quarter of 2023, revenue for the Land Registry was $18.5 million, an increase of $5.4 million or 42 per cent compared to the
same period in 2022. Fee adjustments implemented in the third quarter in relation to the Extension, as well as fee changes made as part of
the annual review of registry fees related to Saskatchewan CPI, led to the increase in revenue. It should also be noted that Saskatchewan CPI
for 2022 was 6.6 per cent, much higher than in recent years due to the impact of inflation.
Most of the revenue generated from the Land Registry is from the Land Titles Registry and is derived from value-based (ad valorem) fees.
Land Titles Registry revenue for the fourth quarter was $17.9 million, increased by $5.5 million or 45 per cent compared to the fourth quarter
in 2022. The growth was due to fee adjustments made in the third quarter of 2023.
Saskatchewan Land Registry revenue,
for the year ended December 31, 2023
Saskatchewan Land Registry revenue,
for the year ended December 31, 2022
95.8%
2.6%
1.6%
95.2%
3.1%
1.6%
Land Titles Registry
Geomatics
Land Surveys Directory
Land Titles Registry
Geomatics
Land Surveys Directory
The following graphs show Land Registry revenue by type of transaction and overall transaction volume, respectively, for the last eight
quarters. Typically, the second and third quarters generate the most revenue for the Land Registry. Fee adjustments made in relation to the
Extension Agreement effective in July 2023, have temporarily impacted revenue seasonality in the short-term as we realize the first full year
of these fee adjustments.
Saskatchewan Land Registry revenue by type
(CAD millions)
Registration
Search
Maintenance/Services
17.1
2.1
0.5
0.6
15.2
1.9
0.5
14.5
12.8
13.9
2.1
11.3
0.5
13.1
1.8
10.8
0.6
12.5
1.9
10.0
0.4
14.7
1.9
12.4
0.4
0.4
17.8
2.2
15.2
18.5
2.2
15.9
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Q1 2023
Q2 2023
Q3 2023
Q4 2023
Note: The fee adjustments implemented in July 2023 positively impacted revenue for the third and fourth quarters of 2023. Therefore, results are not directly
comparable to prior quarters’ results for the reasons described throughout this section. Values may not add due to rounding.
34
MANAGEMENT’S DISCUSSION AND ANALYSIS2023 ISC® Annual Report | Management’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2023
Saskatchewan Land Registry transaction volume
(Number of transactions)
8
2
2
0
1
2
,
3
9
8
6
1
2
,
,
2
1
2
3
9
1
,
1
4
3
3
8
1
6
6
2
8
8
1
,
4
9
4
,
1
9
1
2
4
0
2
9
1
,
5
3
1
,
2
9
1
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Q1 2023
Q2 2023
Q3 2023
Q4 2023
Note: The fee adjustments implemented in July of 2023 positively impacted volume for the third and fourth quarters of 2023 with the introduction of a new fee
tied to mortgage discharge transactions. Therefore, results are not directly comparable to prior quarters’ results for the reasons described throughout this section.
While transaction volume in the Land Titles Registry rose by 5 per cent for the fourth quarter of 2023 when compared to the same period in
2022, most of the growth is due to volume from the introduction of a mortgage discharge fee in July 2023 when fee adjustments related to
the Extension Agreement were made. Excluding this transaction type, volume would have increased by 1 per cent during the quarter.
Regular land transfers and mortgage registrations grew during the period, increasing by 9 per cent and 10 per cent, respectively, when
compared to the fourth quarter of 2022. The current quarter saw a decline in the volume of title searches of 2 per cent. Title searches make
up the largest portion of transaction volume at 69 per cent during the quarter.
For the year ended December 31, 2023, Land Registry revenue was $63.5 million compared to $59.3 million in 2022, an increase of $4.2
million or 7 per cent. Successive interest rate increases by the Bank of Canada from 2022 to mid-2023 led to lower year-over-year activity in
the Saskatchewan real estate sector, which resulted in lower revenue during the first half of 2023 compared to the same period in 2022.
The second half of 2023 saw volume stabilize compared to 2022 and revenue improve due to fee adjustments made in July.
Land Titles Registry revenue was $60.8 million for 2023, up 8 per cent compared to $56.5 million in 2022. This was due to fee adjustments
made on July 29, 2023, despite lower volume, overall, during the year. Regular land transfers and mortgage registration volume ended the
year lower, down 7 per cent and 10 per cent, respectively. Title search volume also ended the year lower, down 6 per cent. As a result,
overall transaction volume declined 5 per cent when compared to 2022.
The following graphs present Land Registry results over the past five years to highlight historical trends. As noted above, the fee
adjustments implemented in the third quarter have positively impacted current year revenue and volume.
Saskatchewan Land Registry revenue by type
for the year ended December 31,
(CAD millions)
Registration
Search
Maintenance
Saskatchewan Land Registry transaction volume
for the year ended December 31,
(Number of transactions)
63.1
8.3
52.7
48.9
7.3
2.4
48.7
7.0
2.2
39.1
39.5
2.2
59.3
7.9
63.5
2.0 8.3
1.8
49.4
53.4
3
4
0
4
7
7
,
,
1
1
4
0
1
7
,
7
5
8
2
4
8
,
4
7
6
3
0
8
,
7
3
9
3
6
7
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
Note: The fee adjustments implemented in July of 2023 positively impacted revenue and volume for 2023. Therefore, 2023 results are not directly comparable to prior years’
results for the reasons described throughout this section. Values may not add due to rounding.
35
MANAGEMENT’S DISCUSSION AND ANALYSISManagement’s Discussion and Analysis | 2023 ISC® Annual ReportFor the Fourth Quarter and Year Ended December 31, 2023 As a result of the increase to the ad-valorem fee (from 0.3 per cent to 0.4 per cent of the value of a land transfer) that was implemented on
July 29, 2023, the revenue related to high-value transactions has increased. For comparative purposes, the graph below has been adjusted
so that the impact of the additional revenue from the new ad-valorem rate is clear. The first six quarters in the graph below were prepared
on the basis that a high-value transaction was a transaction that generated revenue of $10,000 (i.e., from a land value of $3.3 million or
more). The light blue bar for the third and fourth quarters of 2023 were prepared using all transactions with a land value of $3.3 million or
more at the previous ad-valorem rate of 0.3 per cent (for comparison), while the dark blue bar shows the additional revenue generated at
the new ad-valorem rate of 0.4 per cent.
Saskatchewan Land Titles Registry – high-value transaction revenue
(CAD millions)
MSA Extension Ad-Valorem Fee Increase
2.1
1.8
1.0
1.1
1.7
1.4
1.5
0.2
1.3
1.4
0.3
1.0
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Q1 2023
Q2 2023
Q3 2023
Q4 2023
Note: Values may not add due to rounding.
High-value property registration revenue for the fourth quarter of 2023 was $1.4 million, an increase of $0.3 million compared to $1.1 million
in the fourth quarter of 2022. This growth is due to the increase in the ad valorem fee that took effect in July, 2023. Had the ad-valorem rate
remained at 0.3 per cent, high-value transactions revenue in the fourth quarter of 2023 would have been $1.0 million, as illustrated in the
graph above which shows the last 8 quarters of high-value transaction revenue.
High-value property registration revenue was $6.0 million in 2023, consistent with 2022. The first half of 2023 experienced lower revenue
from these transactions, while the second half of the year saw higher revenue due to the fee adjustments implemented in July. The
following graph presents the split of high-value transactions over the past five years between commercial, agricultural and other.
The main customers of the Land Registry include law firms, financial institutions, governments, surveyors, developers and resource
companies as well as the general public. For 2023, the top 20 Land Registry customers comprised 40 per cent of revenue and the top 100
Land Registry customers represented 79 per cent of revenue.
Saskatchewan Land Titles Registry – high-value
transaction revenue
(CAD millions)
Commercial
Agricultural
Other
6.2
0.4
2.3
3.5
6.0
0.6
2.2
3.2
6.0
0.3
2.2
3.6
4.3
0.4
0.9
2.9
0.2
3.8
1.3
2.2
2019
2020
2021
2022
2023
Note: The fee adjustments implemented in July of 2023 positively impacted revenue
for 2023. Therefore, 2023 results are not directly comparable to prior years’ results for
the reasons described throughout this section. Values may not add due to rounding.
36
MANAGEMENT’S DISCUSSION AND ANALYSIS2023 ISC® Annual Report | Management’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2023
Saskatchewan Personal Property Registry
For the fourth quarter of 2023, revenue for the Personal Property Registry was $2.9 million, consistent with the same quarter in 2022.
Overall volume was up 6 per cent during the period when compared to the same period of 2022. Registration, search and maintenance
volume rose by 6 per cent, 6 per cent and 3 per cent, respectively, compared to the same period in 2022.
The following graph shows the transaction volume for the Personal Property Registry by quarter.
Saskatchewan Personal Property Registry Transaction Volume
(Number of transactions)
7
9
9
9
0
1
,
6
2
0
3
2
1
,
7
1
8
5
1
1
,
,
1
8
6
5
0
1
3
4
1
,
0
1
1
3
6
7
4
2
1
,
6
6
9
3
1
1
,
0
7
9
,
1
1
1
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Q1 2023
Q2 2023
Q3 2023
Q4 2023
Full year revenue for the Personal Property Registry was $11.9 million in 2023, an increase of $0.5 million or 5 per cent compared to 2022.
Registration, search and maintenance revenue rose by 5 per cent, 2 per cent and 9 per cent, respectively. Fee adjustments made in July
2022 resulted in a higher revenue growth rate than volume growth during the first half of 2023, which was the main driver of the revenue
increase year-over-year.
Overall volume for 2023 was consistent with 2022. Search volume, which represented 63 per cent of the volume for the registry this year,
rose by 2 per cent. Registration and maintenance volume were consistent with the prior year.
The following graphs present Personal Property Registry revenue and transaction volume to show trends over the past five years.
Saskatchewan Personal Property Registry revenue by type
for the year ended December 31,
(CAD millions)
Registration
Search
Maintenance
Saskatchewan Personal Property Registry transaction volume
for the year ended December 31,
(Number of transactions)
10.2
1.1
2.5
6.5
10.1
1.1
2.4
6.5
11.0
1.2
2.8
7.0
11.3
1.2
2.9
7.3
11.9
1.3
2.9
7.6
7
2
5
,
7
5
4
8
1
3
,
7
2
4
6
5
8
,
7
4
4
,
1
2
5
4
5
4
,
2
4
8
0
6
4
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
Note: Values may not add due to rounding.
Customers of the Personal Property Registry are primarily in the financial sector but also include law firms. The top 20 Personal Property
Registry customers encompassed about 85 per cent of the revenue in 2023, while the top 100 yielded 95 per cent of the revenue.
37
MANAGEMENT’S DISCUSSION AND ANALYSISManagement’s Discussion and Analysis | 2023 ISC® Annual ReportFor the Fourth Quarter and Year Ended December 31, 2023 Saskatchewan Corporate Registry
Revenue for the Corporate Registry for the fourth quarter of 2023 was $3.2 million, an increase of 13 per cent, or $0.4 million, compared to
the same period in 2022. Search revenue grew by 61 per cent mainly due to Saskatchewan CPI fee adjustments which came into effect in
July 2023. Registration revenue grew by 15 per cent as a result of higher levels of new entity creation in the registry, while maintenance rose
by 3 per cent.
The following graph shows transaction volume for the Corporate Registry by quarter.
Saskatchewan Corporate Registry transaction volume
(Number of transactions)
0
3
7
,
8
9
8
9
7
,
1
9
6
0
3
5
8
,
9
7
4
8
8
,
,
3
1
5
4
0
1
8
8
3
,
1
9
9
6
4
5
8
,
2
7
1
,
2
9
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Q1 2023
Q2 2023
Q3 2023
Q4 2023
Transaction volume for the fourth quarter of 2023 grew by 4 per cent when compared to the same period of 2022. Search transactions,
which are the largest component of volume and accounted for 63 per cent of overall volume during the quarter, rose by 4 per cent.
Registration volume increased by 12 per cent while maintenance volume remained consistent with the same period in 2022.
For the full year, revenue for the Corporate Registry was $12.0 million, an increase of $0.8 million, or 7 per cent, compared with 2022. During
2023, registration revenue rose by 6 per cent when compared to 2022. Search revenue grew by 25 per cent due to CPI pricing increases
which came into effect on July 29, 2023. Maintenance revenue, the largest of the three revenue streams, increased by 3 per cent during the
year when compared to 2022.
Annual transaction volume for 2023 rose by 3 per cent compared to 2022. Registration volume grew by 5 per cent as a result of higher
levels of new entity creation in the registry during the year. Search volume grew at 3 per cent while maintenance volume remained flat
when compared to the prior year.
The following graphs present Corporate Registry revenue and transaction volume over the past five years illustrating further trends.
Saskatchewan Corporate Registry revenue by type
for the year ended December 31,
(CAD millions)
Registration
Search
Maintenance
Saskatchewan Corporate Registry Transaction Volume
for the year ended December 31,
(Number of transactions)
10.2
1.4
2.5
6.3
10.5
1.3
2.6
6.6
11.2
1.5
3.0
6.8
11.2
1.5
2.8
6.9
12.0
1.9
3.0
7.1
5
9
2
,
7
4
3
4
9
4
8
3
3
,
3
5
1
,
9
5
3
,
3
1
3
4
6
3
2
4
5
3
7
3
,
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
Note: Values may not add due to rounding.
38
MANAGEMENT’S DISCUSSION AND ANALYSIS2023 ISC® Annual Report | Management’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2023 For the Corporate Registry, customers include law firms and companies in the financial sector, as well as the Government of Saskatchewan.
They also include corporations, non-profit corporations, co-operatives and sole proprietorships that are, were or will be registered in the
Corporate Registry. The top 20 Corporate Registry customers produced 34 per cent of revenue in 2023 and the top 100 customers
accounted for 52 per cent of revenue for the year.
Ontario Property Tax Assessment Services
Revenue for the Ontario Property Tax Assessment Services division in the fourth quarter of 2023 was $4.0 million, an increase of 4 per cent
compared to $3.8 million in the same quarter last year. Total revenue for each year of the agreement with the Government of Ontario is
determined at the time of renewal and is paid monthly. Should the Government of Ontario request any change orders during the term of
the contract, the revenue from any change order is based on the scope of work agreed to by the parties and is in addition to regular
revenue.
Ontario Property Tax Assessment Services revenue for the year ended December 31, 2023, was $15.5 million, $6.7 million higher than the
$8.9 million realized in 2022, as a result of a full year of revenue during the current year when compared to seven months in the prior year.
REGISTRY OPERATIONS EXPENSES, EBITDA AND ADJUSTED EBITDA
Registry Operations adjusted EBITDA
for the three months ended December 31,
(CAD millions)
17.3
11.8
Registry Operations adjusted EBITDA
for the year ended December 31,
(CAD millions)
58.9
52.1
+47%
+13%
2022
2023
2022
2023
(thousands of CAD)
Revenue
Total expenses1
EBITDA
Adjustments2
Adjusted EBITDA
Three Months Ended December 31,
2022
2023
Year Ended December 31,
2022
2023
$ 28,519
12,782
$ 15,737
1,590
$ 17,327
$ 22,605
12,346
$ 10,259
1,555
$ 11,814
$ 103,516
48,236
$ 55,280
3,644
$ 58,924
$ 91,721
40,828
$ 50,893
1,166
$ 52,059
1 Total expenses exclude interest, taxes, depreciation and amortization.
2 As shown in Section 2.5 “Consolidated EBITDA and adjusted EBITDA”, adjusted EBITDA adjustments are comprised of share-based compensation and acquisition, integration
and other costs applicable to each segment.
Adjusted EBITDA for Registry Operations for the fourth quarter was $17.3 million, up 47 per cent compared to the same period last year. The
increase was largely due to the fee adjustments made in July 2023, pursuant to the Extension Agreement and as part of the annual fee
adjustments made based on Saskatchewan CPI. Overall expenses, which include expenses related to registry enhancements, remained
relatively constant for the quarter compared to the prior year quarter. The increase in Registry Operations adjusted EBITDA margin during
the quarter compared to the prior period was largely driven by the $5.4 million increase in Land Registry revenue due to fee adjustments
described above with volume remaining largely consistent with the prior year.
39
MANAGEMENT’S DISCUSSION AND ANALYSISManagement’s Discussion and Analysis | 2023 ISC® Annual ReportFor the Fourth Quarter and Year Ended December 31, 2023
Year-over-year, adjusted EBITDA was $58.9 million, an increase of $6.9 million, or 13 per cent. This was driven by the fee adjustments
discussed above combined with a full year of revenue from Ontario Property Tax Assessment Services compared to seven months in the
prior year. Offsetting this was a reduction in Saskatchewan Land Registry transactions year-over-year due to reduced activity in the
Saskatchewan real estate sector, particularly in the first half of the year, following the impact of successive interest rate increases by the
Bank of Canada that commenced in the first quarter of 2022 and continued until mid-2023. Expenses for the full year included expenses
related to registry enhancements for the Saskatchewan Registries, which are expected to continue into 2024, as well as a full year of
expenses from Ontario Property Tax Assessment Services compared to seven months in the prior year.
3.2 Services
Services delivers solutions uniting public records data, customer authentication, corporate services, collateral management, asset recovery
and accounts receivable management to support registration, due diligence and lending practices across Canada.
Our offerings are generally categorized into three divisions: Corporate Solutions, Regulatory Solutions and Recovery Solutions. The table
below sets out the various offerings provided by the Services segment.
Division
Offering
Products
Incorporation Services
Corporate
Solutions
Corporate Supplies
Know-Your-Customer (“KYC”) and
Due Diligence
Regulatory
Solutions
Collateral Management
Nationwide Business Name Registration and Renewals
Security Filings and Registrations
Minute Books
Seals and Stamps
Corporate Legal Packages
Individual Identification
Legal Entity Validation
Beneficial Ownership Validation
Account Onboarding Services
US and International Corporate Entity Validation
Corporate Profile or Business Name Searches
NUANS®1 Searches
Real Estate Searches
Vital Statistics Searches
PPSA2/RDPRM3 Search and Registrations
Bank Act Filing
Notice of Security Interest (Fixture) Registrations
Land Searches
US UCC4 Search and Filings
Asset Recovery
Recovery
Solutions
Accounts Receivable Management
Fully managed service across Canada
Identification, retrieval and disposition of movable assets
Early-stage collection activities
Late-stage collection activities
1 A NUANS® report is a search that provides a comprehensive comparison of proposed corporate, business or trademark names with existing names already in use by other
businesses and corporations. NUANS® name reports reserve the proposed name for 90 days, providing the time necessary to prepare and file incorporations, extra-provincial
registrations, amalgamations or other relevant corporate filings.
2 Personal Property Security Act.
3 Registre des Droits Personnels et Réels Mobiliers (translated as Register of Personal and Real Movable Rights).
4 Uniform Commercial Code.
40
MANAGEMENT’S DISCUSSION AND ANALYSIS2023 ISC® Annual Report | Management’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2023 Competition
Regulatory Solutions
Our competitors vary by market and geography. They primarily
include other intermediaries and suppliers to lenders and legal
professionals.
Corporate Solutions
Corporate Solutions captures revenue from nationwide search,
business name registration and corporate filing services sold
primarily to legal professionals or to the general public directly or
indirectly through our government relationships. It further derives
revenue from our corporate supplies business where our customers
include legal professionals and the general public.
Incorporation Services
• Corporate Solutions provides a convenient, cost-effective
method to incorporate businesses online or through our staff-
assisted process. Leveraging our online technology platforms,
Corporate Solutions services legal customers and the general
public through a team of experienced law clerks in Ontario
and Quebec.
• The Company has historically held one of the two exclusive
licences, which has allowed us to access the Ontario Corporate
Registry electronically on behalf of customers. Ontario has been
transitioning to a new licensing model and launched the first
phase of its new public portal in October 2021 and subsequently
took steps to further open this portal in the first quarter of 2023.
During the third quarter of 2023, an extension to the contract
with the Government of Ontario that retains our preferential
access rights was renegotiated. We believe that our strong
customer service supported by the industry-leading Registry
Complete platform will allow us to differentiate our service from
the public portal. The Company also has non-exclusive licences
to do the same in all other provincial and federal (Corporations
Canada) corporate registries across Canada.
•
In addition to incorporations, various other corporate filings
are often required to operate a business. These include
amendments to a company’s governing articles, amalgamations,
the continuance of a company, a change in registered address
or changes to a board of directors. Corporate Solutions also
provides online and real-time NUANS® and business name
searches, registered agents of service and corporate document
preparation to assist in the organization and maintenance of
a business.
Corporate Supplies
• Corporate Solutions provides a comprehensive array of
corporate supplies to help companies organize and maintain
their corporate legal documents. This is primarily offered through
the most common corporate supplies in packaged or individual
formats, including customized corporate minute books,
corporate seals/embossers, bylaws and share certificates, as well
as a large variety of rubber and self-inking stamps.
1 Financial Transactions and Reports Analysis Centre of Canada.
Regulatory Solutions captures revenue from our KYC, collateral
management and general due diligence service offerings. The
Company uses its proprietary platform to assist customers with
intuitive business rules and advanced automation to deliver
regulatory services to support their credit/banking and legal
processes. Public registry data is leveraged to provide insights and
improved customer experience through a single technology. Our
technology is supplemented with deep subject-matter knowledge
offered through our legal professionals in three locations (Montreal,
Que.; Toronto, Ont.; and Vernon, B.C.).
Our technology platform, Registry Complete, is a unified and
streamlined platform that enables our customers to search and
register with various ministries across Canada in a secure cloud-
based environment. This enhanced service allows our customers
to take advantage of expanded Application Programming
Interface (“API”) service offerings, improved tools, faster turnaround
and a greater array of services in the pursuit of exceptional and
expedient due diligence checks and customer service. It also
addresses key operational gaps in the modern legal and financial
industries landscape.
Our customer base includes both legal and non-legal customers,
such as financial institutions and auto and equipment finance
companies.
Know-Your-Customer (“KYC”) and Due Diligence
• Regulatory Solutions supports legal and financial institutions’
due diligence activities for compliance purposes through the
KYC verification (corporate and individual), public records search
and registration services across Canada. Customers can obtain
numerous reports and intelligence to verify and authenticate
customer data to comply with internal customer onboarding
policies mandated by FINTRAC1/Anti-Money Laundering
regulations. Using a web-based tool and associated APIs that
provide real-time access to validate and verify an individual’s or
a business’ existence, our KYC service aggregates information
from multiple trusted sources to provide reliable and accurate
identification of an individual and/or a business and its principals.
• Our public records search offerings include corporate profiles,
business name searches, NUANS®, PPSA searches, security
searches and real estate searches.
• Due diligence is an essential component of most merger and
acquisition and financing transactions, where searches are
performed to obtain a complete understanding of all legal
obligations associated with a person or business. During a
due diligence undertaking, law firms, lenders and/or other
professional advisors will often order a series of public records
searches to verify third-party information. These searches are
commonly referred to as security (or securities) searches.
41
MANAGEMENT’S DISCUSSION AND ANALYSISManagement’s Discussion and Analysis | 2023 ISC® Annual ReportFor the Fourth Quarter and Year Ended December 31, 2023 • Regulatory Solutions provides security searches that can be
conducted against an individual, business or corporation,
property and assets across the country. Searches will reveal both
present and historical information relating to debts and liabilities,
pending and potential lawsuits, bankruptcy, liens, judgments and
sales of assets across Canada.
• Our customers enjoy a complete turnkey solution where
our team manages every step in the asset recovery process,
including co-ordinating bailiffs, investigators and auctions.
Our process also allows us to increase recoveries through our
superior supply chain management experience.
• Regulatory Solutions also provides account onboarding services
Accounts Receivable Management
and customer care.
Collateral Management
• To ensure or to perfect a security interest against the personal
property of a debtor, secured parties need to register in the
statutory registry under applicable personal property legislation.
Registering provides the secured party with statutory protection
and priority against other parties with competing security
interests against the applicable movable collateral. Once a
secured party has been paid out, or the security against the
debtor is otherwise terminated, registrations (or liens) are then
discharged and removed from the applicable security registry.
• Regulatory Solutions services the adjudication and completes
the loan fulfilment process, which involves detailed searches
and registrations to be completed to perfect the security
interest. The Company has invested in technology, processes
and innovation to ensure customer and industry digitization
strategies are supported. This allows us to offer a complete
lien registry solution that reaches further than the traditional
registry submission services and includes PPSA/RDPRM
searches and management, fixture filings, garage/repair liens
and US UCC filings.
Recovery Solutions
Recovery Solutions offers fully managed asset recovery
accompanied by accounts receivable management services to our
customers. Recovery Solutions allows us to provide our customers
with a full service offering across the credit life cycle from
origination to recovery. By connecting the registrations from our
other offerings to our Recovery Solutions services, we provide our
customers with a seamless recovery process.
Our customers include most of the major banks as well as credit
unions and other creditors.
Asset Recovery
• Recovery Solutions offers a fully-managed service across Canada,
which aids in facilitating and co-ordinating asset recovery on
behalf of our customers. Asset recovery involves identification,
retrieval and disposal of movable assets such as automobiles,
boats, recreational vehicles and other forms of portable physical
assets used as collateral security for primarily consumer-focused
credit transactions.
• As a licenced collections agency, the Company performs
recovery services related to past due accounts in both a first-
party capacity representing our customers, and a third-party
collections capacity.
• Our customers receive a complete collections solution where
they can assign overdue accounts at any stage in the default
process to be pursued in a manner that is respectful to all parties.
Revenue
Revenue is earned through transaction fees for search and
registration services provided through incorporation, KYC, public
records and due diligence, and collateral management services. All
government fees associated with the service are either embedded
in the transaction or management service fee or charged in
addition. Additional revenue is earned in Recovery Solutions
through management fees and commissions earned by the
provision of asset recovery and accounts receivable management
services. Corporate supplies are charged a per-unit fee in the same
manner as a retail transaction product.
Key drivers for our revenue include increased regulatory and
compliance requirements; the growing trend towards outsourcing
business processes and services to realize cost savings and focus on
core business activities; economic activity that can affect credit
lending, mergers, acquisitions, incorporations and various new
business start-up activities; and economic conditions impacting
consumer behaviour, which can affect the financing or default of
new and used movable property in our collateral management and
asset recovery business.
Our revenue in Corporate Solutions and Regulatory Solutions is
reasonably diversified and has little seasonality; instead, it fluctuates
in line with general economic drivers. In particular, our collateral
management services experience seasonality aligned to vehicle and
equipment financing cycles, which are generally more robust in the
second and fourth quarters. Recovery Solutions does not have
specific seasonality but is counter-cyclical to our other business in
that it can perform better in poor economic conditions.
42
MANAGEMENT’S DISCUSSION AND ANALYSIS2023 ISC® Annual Report | Management’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2023 SERVICES REVENUE
Services revenue1
for the three months ended December 31,
(CAD millions)
25.4
10%
16%
74%
22.4
14%
17%
69%
Recovery Solutions
Corporate Solutions
Regulatory Solutions
+13%
Services revenue1
for the year ended December 31,
(CAD millions)
101.7
11%
15%
75%
92.3
12%
17%
71%
Recovery Solutions
Corporate Solutions
Regulatory Solutions
+10%
2022
2023
2022
2023
1 Related Party and other revenue not displayed in graph. Values may not add due to rounding.
(thousands of CAD)
Regulatory Solutions
Recovery Solutions
Corporate Solutions
Related Party and other
Services revenue
Three Months Ended December 31,
2022
2023
Year Ended December 31,
2022
2023
$ 18,850
2,567
3,951
–
$ 25,368
$ 15,410
3,061
3,725
245
$ 22,441
$ 76,166
10,791
14,755
–
$ 101,712
$ 65,863
10,923
15,275
245
$ 92,306
Revenue for Services was $25.4 million for the fourth quarter of 2023, an increase of 13 per cent, or $2.9 million compared to the same
period in 2022. Growth was driven by continued customer and transaction growth in Regulatory Solutions, where financial institutions and
equipment and auto finance customers continued to enhance due diligence processes in an environment of higher interest rates and
increased regulatory oversight.
Revenue on a year-over-year basis increased by 10 per cent or $9.4 million due to customer and transaction growth in Regulatory Solutions.
The following graph demonstrates the growth in Services revenue over the past five years, representing a cumulative annual growth rate of
19 per cent. These revenue increases are the result of new customer onboarding, the addition of value-added services and transaction
growth combined with the acquisition of various value add businesses.
Services Revenue by type
for the year ended December 31,
(CAD millions)
Regulatory Solutions
Corporate Solutions
Recovery Solutions
Services Revenue by type
Services Revenue by type
for the year ended December 31, 2023
for the year ended December 31, 2023
101.7
10.8
14.8
76.2
92.1
10.9
15.3
65.9
10.6%
10.6%
14.5%
14.5%
74.9%
74.9%
75.2
9.5
7.4
58.3
3.7
56.4
4.9
47.7
51.0
5.0
46.0
2019
2020
2021
2022
2023
Note: Related Party and other revenue not displayed in the graphs. Values may not add due to rounding.
Regulatory Solutions
Regulatory Solutions
Corporate Solutions
Corporate Solutions
Recovery Solutions
Recovery Solutions
43
MANAGEMENT’S DISCUSSION AND ANALYSISManagement’s Discussion and Analysis | 2023 ISC® Annual ReportFor the Fourth Quarter and Year Ended December 31, 2023
Regulatory Solutions
Revenue in Regulatory Solutions for the fourth quarter of 2023 was $18.9 million, an increase of $3.4 million or 22 per cent compared to the
same period in 2022. The increase in revenue was a direct result of customer and transaction growth where financial institutions and
equipment and auto finance customers continued to enhance due diligence in an environment of higher interest rates and increased
regulatory oversight.
For the full year, revenue was $76.2 million, an increase of $10.3 million or 16 per cent compared to the same period in 2022. Annual revenue
grew from 2022 for the same reasons described above for the fourth quarter.
Recovery Solutions
Revenue in Recovery Solutions for the fourth quarter of 2023 was $2.6 million, a decrease of $0.5 million or 16 per cent compared to the
same prior year period. The decline during the quarter was due to a reduction in revenue per file in Asset Recovery as a result of a reduction
in used vehicle prices from the highs seen in the prior year combined with reduced Accounts Receivable Management activity.
Revenue for 2023 was $10.8 million, which was consistent with 2022. Following successive interest rate increases by the Bank of Canada
starting in 2022 to mid-2023, we have seen a reduction in used vehicle prices compared to the highs experienced during the COVID-19
pandemic, thereby reducing the revenue per file in Asset Recovery. During the year we saw an increase in individual Asset Recovery
customer assignments which was offset by the loss of one customer who exited the retail auto finance business. We expect a continued
increase in assignments in 2024 from existing customers and by winning new customers.
Corporate Solutions
Corporate Solutions revenue for the quarter was $4.0 million, consistent with the fourth quarter of 2022.
Revenue for 2023 was $14.8 million, a decrease of $0.5 million or 3 per cent compared to 2022. This was due to an expected reduction in
Ontario corporate filing transactions following further opening of the Ontario Business Registry in March 2023, partially offset by new
customer onboarding during the year.
Our Services segment revenue by division is shown in the following graph.
Services Revenue by type1
(CAD millions)
24.9
2.4
3.7
18.7
22.7
3.0
4.3
15.4
Regulatory Solutions
Corporate Solutions
Recovery Solutions
22.2
2.4
3.5
16.3
22.2
3.1
3.7
15.4
24.7
2.9
4.0
17.8
26.1
2.4
3.6
25.6
2.9
3.3
25.4
2.6
4.0
20.1
19.4
18.9
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Q1 2023
Q2 2023
Q3 2023
Q4 2023
1 Related Party and other revenue not displayed in graph. Values may not add due to rounding.
The top 20 Services customers for 2023 comprised almost 65 per cent of revenue, while the top 100 Services customers accounted for
82 per cent of revenue. No single customer accounted for more than 25 per cent of revenue.
44
MANAGEMENT’S DISCUSSION AND ANALYSIS2023 ISC® Annual Report | Management’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2023 SERVICES EXPENSES, EBITDA AND ADJUSTED EBITDA
Services adjusted EBITDA
for the three months ended December 31,
(CAD millions)
4.5
4.1
Services adjusted EBITDA
for the year ended December 31,
(CAD millions)
21.1
19.0
+9%
+11%
2022
2023
2022
2023
(thousands of CAD)
Revenue
Total expenses1
EBITDA
Adjustments2
Adjusted EBITDA
Three Months Ended December 31,
2022
2023
Year Ended December 31,
2022
2023
$ 25,368
20,880
4,488
22
4,510
$
$
$ 22,441
18,458
3,983
$
152
4,135
$
$ 101,712
80,669
$ 21,043
20
$ 21,063
$ 92,306
73,711
$ 18,595
366
$ 18,961
1 Total expenses exclude interest, taxes, depreciation and amortization.
2 As shown in Section 2.5 “Consolidated EBITDA and adjusted EBITDA”, adjusted EBITDA adjustments are comprised of share-based compensation and acquisition, integration
and other costs applicable to each segment.
Adjusted EBITDA for Services was $4.5 million for the fourth quarter compared to $4.1 million for the same period last year. The increase
was driven by continued customer and transaction growth in Regulatory Solutions, augmented by customers in the financial institution and
auto finance sectors as they continued to enhance due diligence processes in an environment of higher interest rates and increased
regulatory oversight. This increase was partially offset by an increase in the cost of goods sold related to the additional revenue and
increased investment in technology.
For the year, Services adjusted EBITDA was $21.1 million compared to $19.0 million in the prior year, an increase of 11 per cent, due to
customer and transaction growth in Regulatory Solutions partially offset by increased cost of goods sold related to this additional revenue
and increased investment in technology. Other costs in Services remained stable when compared to the prior year.
3.3 Technology Solutions
Technology Solutions provides the development, delivery and support of registry (and related) technology solutions, generating revenue
through the following:
• sale of software licences related to our technology platforms;
• provision of technology solution definition and implementation services; and
• provision of monthly hosting, support and maintenance services.
We offer RegSys — a complete registry solution that provides a readily transferable technology platform capable of serving a wide range of
registry needs. RegSys is a multi-register platform that delivers the flexibility, scalability and features that enable public sector organizations
to deliver enhanced services to businesses and citizens.
45
MANAGEMENT’S DISCUSSION AND ANALYSISManagement’s Discussion and Analysis | 2023 ISC® Annual ReportFor the Fourth Quarter and Year Ended December 31, 2023
With a full suite of integrated modules that provide core functionality for submission, enforcement and inquiry processing, RegSys
delivers solutions enabling the provision of core services to citizens in a user-friendly, efficient manner across multiple access points. The
RegSys solution has also been used to manage other legal registers such as intellectual property, securities, licences, charities, UCC and
pension schemes.
Competitors in this segment include other registry software providers that develop and provide software platforms to manage registries.
On the technology services side, our competitors include all technology services organizations that provide application development,
systems integration and/or application management services. This includes large multinationals or local niche players, both of which we can
partner with to complement our offerings depending on the customer’s needs.
Technology Solutions does not experience seasonality but does fluctuate due to the timing of project-related revenue.
TECHNOLOGY SOLUTIONS REVENUE
Technology Solutions revenue
for the three months ended December 31,
(CAD millions)
7.9
54%
Related Party
Third Party
46%
+119%
3.6
71%
29%
Technology Solutions revenue
for the year ended December 31,
(CAD millions)
23.2
16.0
63%
37%
60%
Related Party
Third Party
40%
+45%
2022
2023
2022
2023
(thousands of CAD)
Third Party
Related Party
Technology Solutions revenue
Three Months Ended December 31,
2023
3,604
4,312
7,916
$
$
2022
1,047
2,560
3,607
$
$
Year Ended December 31,
2023
2022
$
9,268
13,906
$ 23,174
$
5,849
10,168
$ 16,017
Revenue in Technology Solutions was $7.9 million for the quarter, an increase of 119 per cent or $4.3 million compared to $3.6 million for the
same period in 2022.
Third Party revenue for the quarter increased by $2.6 million compared to the fourth quarter of 2022. Project work continued on new
contracts disclosed in the first quarter of 2023, including for the States of Guernsey and the Department of Registrar of Companies and
Intellectual Property in Cyprus, accompanied by execution on other ongoing contracts.
Technology Solutions continued delivery of registry enhancements for the Saskatchewan Registries division in Registry Operations, in
addition to support and development work for the rest of the organization. The segment is also continuing development of a registry
solution to support operation of the International Registry of Interests in Rolling Stock (formerly referred to as the International Registry for
Railway Rolling Stock) that will be operated by Regulis, currently reported under our Corporate segment. Related Party revenue in any
quarter is dependent on resources used or consumed internally, particularly in Registry Operations. Our intent is to continue to service the
needs of internal customers as efficiently and effectively as possible, including the provision of service through related-party resources;
therefore, segment revenue may continue to fluctuate over time, particularly as we pursue additional Third Party revenue.
46
MANAGEMENT’S DISCUSSION AND ANALYSIS2023 ISC® Annual Report | Management’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2023
Technology Solutions Revenue by type
(CAD millions)
4.4
2.6
1.8
4.2
2.7
1.5
3.8
2.3
1.5
3.6
2.6
1.0
4.3
2.7
1.6
Third Party
Related Party
7.9
4.3
3.6
6.1
3.7
2.4
4.8
3.2
1.6
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Q1 2023
Q2 2023
Q3 2023
Q4 2023
Revenue for the year was $23.2 million, an increase of $7.2 million or 45 per cent compared to 2022.
Third Party revenue for 2023 was $9.3 million compared to $5.8 million in 2022 due to continued progress with new contracts announced
in 2023 and ongoing solution definition and implementation contracts. The solution definition and implementation revenue was supported
by consistent hosting, support and maintenance revenue when compared to the prior year.
Related Party revenue for the year increased for the same reason as the quarter.
The following graph provides details on Technology Solutions revenue over the past five years. While Technology Solutions Third Party
revenue was impacted by the COVID-19 pandemic through delays in active solution definition and implementation contracts as well as new
projects coming to market, we began to see renewed interest in procurement activities for these projects in 2022. This translated into new
wins announced early in 2023 and the recovery of Third Party revenue in 2023 overall.
Technology Solutions revenue by type
(CAD millions)
Technology Solutions revenue
Technology Solutions revenue
for the year ended December 31, 2023
for the year ended December 31, 2023
Third Party
Related Party
25.0
20.0
15.0
10.0
5.0
0.0
24.2
12.8
20.6
9.8
11.4
10.8
23.2
13.9
9.3
18.1
9.5
8.6
16.0
10.2
5.8
2019
2020
2021
2022
2023
Note: Values may not add due to rounding.
60.0%
60.0%
40.0%
40.0%
Third Party
Third Party
Related Party
Related Party
47
MANAGEMENT’S DISCUSSION AND ANALYSISManagement’s Discussion and Analysis | 2023 ISC® Annual ReportFor the Fourth Quarter and Year Ended December 31, 2023 TECHNOLOGY SOLUTIONS EXPENSES, EBITDA AND ADJUSTED EBITDA
Technology Solutions adjusted EBITDA
for the three months ended December 31,
(CAD millions)
2.2
Technology Solutions adjusted EBITDA
for the year ended December 31,
(CAD millions)
(1.0)
2022
2023
(1.2)
2022
0.8
2023
(thousands of CAD)
Revenue
Total expenses1
EBITDA
Adjustments2
Adjusted EBITDA
Three Months Ended December 31,
2022
2023
Year Ended December 31,
2022
2023
$
$
$
7,916
5,722
2,194
30
2,224
$
$
$
3,607
4,807
(1,200)
218
(982)
$ 23,174
22,376
798
28
826
$
$
$ 16,017
17,397
(1,380)
$
148
(1,232)
$
1 Total expenses exclude interest, taxes, depreciation and amortization.
2 As shown in Section 2.5 “Consolidated EBITDA and adjusted EBITDA”, adjusted EBITDA adjustments are comprised of share-based compensation and acquisition, integration
and other costs applicable to each segment.
Adjusted EBITDA for Technology Solutions was $2.2 million for the quarter compared to a loss of $1.0 million in the fourth quarter of 2022
and $0.8 million for the year ended December 31, 2023, compared to a loss of $1.2 million for 2022. Progress continues to be made on new
and continuing solution definition and implementation contracts combined with related-party projects, including registry enhancements for
Registry Operations. The advancement of these contracts has led to increased revenue for both the quarter and year when compared to
the same prior year periods. Growth in revenue has been partially offset by continued investments in people to deliver on solution definition
and implementation contracts as well as related-party priorities as described above.
48
MANAGEMENT’S DISCUSSION AND ANALYSIS2023 ISC® Annual Report | Management’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2023
3.4 Corporate and other
Corporate and other includes expenses related to our corporate activities and shared services functions. The operations of Regulis are
also currently reported in this segment. Eliminations of inter-segment revenue and costs are presented separately in the Financial
Statements and therefore excluded below. Management believes this format provides a transparent representation of the Corporate and
other activities.
Subsequent to the end of the fourth quarter, on March 8, 2024, Regulis launched the International Registry of Interests in Rolling Stock
(formerly referred to as the International Registry for Railway Rolling Stock). Regulis holds a contract under the Luxembourg Rail Protocol of
the Cape Town Convention, which provides the exclusive right and obligation to develop, deliver and operate the International Registry of
Interests in Rolling Stock for a period of 10 years from the date the registry goes live. The launch of this new international registry aligns well
with ISC’s expertise in the development, management and operation of registry solutions.
On November 30, 2023, ISC announced that the Company, including its subsidiaries, achieved ISO/IEC 27001 certification. This certification,
which defines requirements for an ISMS, reflects ISC’s commitment to establishing, implementing, maintaining and continually improving an
ISMS and ensuring a robust system for managing risks related to data security. Costs associated with obtaining this certification have been
included within Corporate and other for 2023.
(thousands of CAD)
Third Party
Related Party
Corporate and other revenue
Total expenses1
EBITDA
Adjustments2
Adjusted EBITDA
Three Months Ended December 31,
Year Ended December 31,
2023
–
37
37
(2,005)
(1,968)
282
(1,686)
$
$
$
$
2022
11
36
47
(2,281)
(2,234)
788
(1,446)
$
$
$
$
2023
24
150
174
(8,816)
(8,642)
2,162
(6,480)
$
$
$
$
2022
19
145
164
(7,342)
(7,178)
1,780
(5,398)
$
$
$
$
1 Total expenses exclude interest, taxes, depreciation and amortization.
2 As shown in Section 2.5 “Consolidated EBITDA and adjusted EBITDA”, adjusted EBITDA adjustments are comprised of share-based compensation and acquisition, integration
and other costs applicable to each segment.
Adjusted EBITDA for the three months ended December 31, 2023, was consistent with the prior year period. For the year, adjusted EBITDA
decreased by $1.1 million due to an increase in corporate costs related to investments in people, technology including ISO/IEC 27001 and
ISC’s continued focus on growth initiatives.
49
MANAGEMENT’S DISCUSSION AND ANALYSISManagement’s Discussion and Analysis | 2023 ISC® Annual ReportFor the Fourth Quarter and Year Ended December 31, 2023
4 Summary of Consolidated Quarterly Results
The following table sets out select results for the past eight quarters. Registry Operations experiences moderate seasonality, primarily
because Saskatchewan Land Registry revenue fluctuates in line with real estate transaction activity in Saskatchewan. Typically, the second
and third quarters of the fiscal year generate higher revenue, when real estate activity is traditionally highest. Fee adjustments made in July
2023 have temporarily impacted revenue seasonality in the short-term as we realize the first full year of these fee adjustments. Volume
seasonality has also been impacted with the introduction of mortgage discharge fees starting in July. Ontario Property Tax Assessment
Services revenue does not experience seasonality, as revenue is recognized evenly throughout the year under the agreement with the
Government of Ontario.
In Services, revenue for our Corporate Solutions and Regulatory Solutions divisions is diversified and has little seasonality; instead, it
fluctuates in line with general economic drivers. Some smaller categories of products or services can have some seasonal variation,
increasing slightly during the second and fourth quarters. In particular, our collateral management services experience seasonality aligned
with vehicle and equipment financing cycles, which are generally stronger in the second and fourth quarters. Our Recovery Solutions
revenue also does not have specific seasonality, but is generally counter-cyclical to our other business, in that it can perform better in poor
economic conditions.
Technology Solutions does not experience seasonality; however, this segment is impacted by the timing of procurement activities largely
undertaken by governments around the world and the timing of revenue recognition related to the progress of work on solution definition
and implementation contracts.
The balance of our corporate activities and shared services functions do not experience seasonality. Expenses are generally consistent from
quarter to quarter but can fluctuate due to the timing of project-related or acquisition activities. As a result, our EBITDA and adjusted
EBITDA margin fluctuates in line with the cumulative impact of the above factors.
(thousands of CAD)
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
2023
2022
$ 49,124 $ 46,104 $ 48,768 $ 50,870 $ 44,153
33,463
36,922
38,565
33,919
39,396
10,559
(905)
9,654
(2,790)
6,708
(1,038)
5,670
(1,721)
$ 6,864 $ 3,949 $
11,846
(1,038)
10,808
(3,052)
7,756 $ 11,657 $
16,951
(666)
16,285
(4,628)
10,690
(435)
10,255
(2,848)
7,407
48
110
688
(310)
7,804 $ 11,347 $
(448)
6,959
$ 6,974 $ 4,637 $
$ 14,687 $ 10,808 $ 15,829 $ 20,458 $ 13,835
14,586
17,037
14,516
7,969
8,652
6,752
10,069
10,149
10,054
10,820
11,357
9,883
31.3%
32.5%
29.9%
33.0%
29.5%
34.9%
0.42
$
0.41
$
19,246
10,785
14,430
13,218
40.2%
37.8%
13,521
5,942
6,282
8,995
23.4%
29.3%
0.39 $
0.38 $
0.22 $
0.22 $
0.66 $
0.65 $
0.44 $
0.43 $
$ 57,491 $ 54,610
43,334
43,683
$ 53,295
40,965
13,808
(6,218)
7,590
(1,876)
$ 5,714 $
11,276
(5,171)
6,105
(1,871)
4,234
12,330
(889)
11,441
(3,208)
$ 8,233
104
(27)
4,207
$ 5,818 $
$ 20,451 $ 16,900
19,209
8,357
11,978
14,444
30.9%
35.2%
0.24
0.23
21,317
9,848
12,695
13,975
35.6%
37.1%
0.32 $
0.31 $
$
$
5
$ 8,238
$ 16,441
17,824
9,256
10,713
12,468
30.8%
33.4%
0.47
$
0.46
$
Revenue
Expenses
Net income before items
noted below
Net finance expense
Income before tax
Income tax expense
Net income
Other comprehensive
income (loss)
Total comprehensive income
EBITDA
Adjusted EBITDA
Adjusted net income
Free cash flow
Adjusted free cash flow
EBITDA margin
Adjusted EBITDA margin
Earnings per share, basic
Earnings per share, diluted
50
MANAGEMENT’S DISCUSSION AND ANALYSIS2023 ISC® Annual Report | Management’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2023
5 Business Strategy
The Company’s strategy is influenced by a set of principles:
Long-term Orientation
Growth
Strategic focus on the sustainability
of the business and the services
we deliver
Strategically leverage the investments
and achievements of 2023 while
intensifying our focus on organic
growth and continuing to execute on
accretive M&A opportunities
Values and Differentiation
Strategically focus on service delivery
quality – how we treat our customers
and employees remains at the core.
Leveraging our proven approach for sustainable growth, underpinned by our strategic principles, the updated pillars of our growth
strategy include:
(1) Organizational Excellence to Provide a Strong Foundation
• Deliver leading registry and regulatory services and solutions to customers through existing and new lines of business, ensuring an
exceptional customer experience for those interacting with ISC’s people and information.
• Deploy capital on M&A and internal investments to generate a return that exceeds our cost of capital and aligns with our long-term
return on invested capital (“ROIC”)1 target.
(2) Organic Growth in Our Three Segments
• Accelerate our revenue growth while maintaining strong adjusted EBITDA margins.
• Registry Operations: Operates registries and provides related services on behalf of governments and other institutions.
• Services: Delivers value-add services to the financial and legal sectors, utilizing public data and records.
• Technology Solutions: Designs, implements, and supports registry and regulatory technology solutions.
(3) M&A and Partnerships as an Accelerant
• Deploy capital on M&A and internal investments to generate a return that exceeds our cost of capital and aligns with our long-term
ROIC target.
• Acquisitions will continue to play an important part in our growth strategy, enabled by our strong free cash flow generation and
organizational capability.
• We look for companies that align with our customer needs, possess the right cultural fit, and have the ability to generate strong financial
returns for ISC shareholders.
This will enable us to execute on our next phase of growth. Having doubled the size of ISC on a revenue and adjusted EBITDA basis over the
last 10 years, our goal is to again double the size of the Company, on a similar metrics basis and based on 2023 results, but in half the time (5
years), through a combination of organic growth and M&A.
1 The Company does not provide ROIC guidance and will not be disclosing the ROIC targets. Disclosure of the ROIC targets would reveal sensitive information, including
information relating to forecasted earnings and capital structure extending beyond a fiscal year.
51
MANAGEMENT’S DISCUSSION AND ANALYSISManagement’s Discussion and Analysis | 2023 ISC® Annual ReportFor the Fourth Quarter and Year Ended December 31, 2023 Our measures of success will be driven by a mix of:
TARGET
Profitable Annual Revenue Growth
Customer and Employee Satisfaction
MEASURES
Measured by progress towards doubling within
5 years.
Measured by regular customer survey results and
employee turnover.
HOW
• Significant organic revenue growth targets1
• Ensure an exceptional customer experience
• Supplemented with M&A and other growth
acquisitions, targeting 1 to 2 transactions per
year, ensuring the long-term returns exceed
our cost of capital.
creating delighted customers and ISC ambassadors.
• Advance a high-performance organization that
people love working at.
1 Such as shown through our 2024 revenue guidance.
We regularly review and if necessary, adjust our strategy to ensure that the Company remains well positioned in the long term, while being
adaptable to near-term factors.
6 Financial and Capital Management
6.1 Cash flow
Our primary source of operating cash flow is generated from revenue related to the Registry Operations and Services segments. Our
primary uses of these funds are operational expenses, capital and other growth-related expenditures, reduction of long-term debt and the
payment of dividends.
Historically, ISC has financed operations and met capital and finance expenditure requirements through cash provided from operating
activities. The Company has also used borrowings to supplement cash generated from operations to finance acquisition activities. The
Company believes that internally-generated cash flow, supplemented by additional borrowings that may be available to us through our
Credit Facility and Base Shelf Prospectus dated April 3, 2023, will be sufficient to meet cash requirements, capital expenditures, merger and
acquisition activity and anticipated dividend payments (refer to Note 15 in the December 31, 2023 Financial Statements, which are available
on our website at www.isc.ca and in the Company’s profile on SEDAR+ at www.sedarplus.ca for our existing Credit Facility). In connection
with the Extension Agreement, ISC entered into the Amended and Restated Credit Agreement with its syndicate of lenders discussed
further in Section 6.3 “Debt”.
Liquidity risk is managed based on financial forecasts and anticipated cash flow. The majority of cash is held with Canadian chartered banks
and the risk of loss is believed to be minimal. As at December 31, 2023, the Company held $24.2 million in cash compared to $34.5 million as
at December 31, 2022, a decrease of $10.3 million as the Company used excess cash to reduce its long-term debt.
The Company expects to be able to meet its cash requirements, including being able to settle current liabilities of $63.5 million (December
31, 2022 – $39.6 million) and meet any unanticipated cash requirements due to changes in working capital commitments. Such changes
that would affect our liquidity may arise from, among other factors, general economic conditions and the failure of one or more customers
to pay their obligations. Deficiencies arising from short-term working capital requirements and capital expenditures may be financed on a
short-term basis with bank indebtedness or on a permanent basis with offerings of securities.
52
MANAGEMENT’S DISCUSSION AND ANALYSIS2023 ISC® Annual Report | Management’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2023 CONSOLIDATED FREE CASH FLOW AND ADJUSTED FREE CASH FLOW
(thousands of CAD)
Adjusted free cash flow
Add (subtract):
Share-based compensation (expense)
Acquisition, integration and other costs
Registry enhancement capital expenditures
Free cash flow1,2
Add (subtract):
Cash additions to property, plant and equipment
Cash additions to intangible assets3
Interest received
Interest paid
Interest paid on lease obligations
Principal repayment on lease obligations
Net change in non-cash working capital4
Net cash flow provided by operating activities
Three Months Ended December 31,
2022
2023
Year Ended December 31,
2022
2023
$ 13,975
$
8,995
$ 50,770
$ 44,390
(307)
(559)
(414)
$ 12,695
144
714
(263)
3,840
123
637
4,263
$ 22,153
(2,180)
(533)
–
6,282
$
163
157
(269)
1,162
101
600
10,224
$ 18,420
(283)
(4,104)
(943)
$ 45,440
394
2,000
(1,163)
8,533
400
2,383
(1,216)
$ 56,771
(1,483)
(1,977)
–
$ 40,930
574
890
(463)
2,902
403
2,137
(3,837)
$ 43,536
1 Free cash flow is not recognized as a measure under IFRS and does not have a standardized meaning prescribed by IFRS and therefore, they may not be comparable to
similar measures reported by other companies; refer to Section 8.8 “Non-IFRS financial measures”.
2 Commencing on January 1, 2023, ISC revised the definition of free cash flow which is a non-IFRS measure to include interest received and paid as well as principal
repayments on lease obligations. This is further defined in Section 8.8 “Non-IFRS financial measures”, reconciled above and has been reflected in the comparative period.
The impact of the change to free cash flow to include interest received and paid, interest paid on lease obligations and principal repayments on lease obligations on
the previously stated prior year results was a $1.6 million decrease for the three months ended December 31, 2022 and a decrease of $5.0 million for the year ended
December 31, 2022.
3 During the year, ISC entered into the Extension Agreement which resulted in the acquisition of an intangible asset related to the right to manage and operate the Saskatchewan
Registries until 2053. Cash paid during the year of $153.4 million has been excluded from the above calculation due to its long-term and transformational nature.
4 Refer to Note 26 to the Financial Statements for reconciliation.
Free cash flow increased to $12.7 million for the fourth quarter of 2023 compared to $6.3 million in the prior year quarter due to stronger
results from operations during the current period. This was due to:
• A full quarter of increased cash flows related to the fee adjustments for the Saskatchewan Registries in Registry Operations that took
effect in July 2023.
• Continued customer and transaction growth in Services increasing cash flows.
• Technology Solutions advancing new and ongoing solution definition and implementation contracts increasing the segment’s cash flow
contributions when compared to the prior year quarter.
The stronger results of operations were partially offset by increased interest paid on debt obligations during the quarter compared to the
same period in the prior year due to a combination of increased borrowings associated with the Extension Agreement and an increase in
interest rates.
For the year ended December 31, 2023, free cash flow was $45.4 million, up from $40.9 million in the prior year due to the explanations
provided above for the fourth quarter. While the Company experienced lower Land Registry volume resulting from lower activity in the
Saskatchewan real estate sector during the first half of the year, this was offset by the fee adjustments made in July 2023. Strong results in
Services were also a contributing factor with customer and transaction growth in the Regulatory Solutions division accompanied by
increased contributions in 2023 by Technology Solutions.
Adjusted free cash flow for the quarter was $14.0 million, up 55 per cent compared to $9.0 million in the fourth quarter of 2022 and was
$50.8 million for the full year, compared to $44.4 million in 2022, an increase of 14 per cent. While certain items are excluded from adjusted
free cash flow, including the commencement of registry enhancement work for Registry Operations, the explanation for the increase from
the prior year for both the quarter and the full year is consistent with the reasons cited for free cash flow.
53
MANAGEMENT’S DISCUSSION AND ANALYSISManagement’s Discussion and Analysis | 2023 ISC® Annual ReportFor the Fourth Quarter and Year Ended December 31, 2023
The following table summarizes sources and uses of funds for the fourth quarter and year ended December 31, 2023 and 2022:
(thousands of CAD)
Net cash flow provided by operating activities
Net cash flow used in investing activities
Net cash flow provided by (used in)
financing activities
Effects of exchange rate changes on cash held in
foreign currencies
Increase (decrease) in cash
Cash, beginning of period
Cash, end of period
Three Months Ended December 31,
2022
$ 18,420
(563)
2023
$ 22,153
(594)
Year Ended December 31,
2022
$ 43,536
(55,619)
2023
$ 56,771
(154,886)
(18,742)
(16,435)
87,799
6,247
$
(15)
2,802
21,391
$ 24,193
150
$
1,572
32,907
$ 34,479
30
$ (10,286)
34,479
$ 24,193
211
$
(5,625)
40,104
$ 34,479
NET CASH FLOW PROVIDED BY OPERATING ACTIVITIES
Net cash flow provided by operating activities was $22.2 million for the fourth quarter compared to cash provided of $18.4 million for the
same period last year. The increase of $3.7 million was due to improved contributions across all operating segments, partially offset by a $6.0
million reduction in cash from changes in non-cash working capital. Non-cash working capital changes mainly include the following:
• A $4.2 million decrease in cash flow from non-cash working capital due to a smaller increase in accounts payable in the current quarter
when compared to the prior year quarter. This is primarily attributable to a lower share price reducing share-based compensation
liabilities, together with timing differences in payables in the Services’ Recovery Solutions division.
• A $3.3 million decline in cash flow due to the timing of Technology Solutions payments related to contract assets and contract liabilities,
which is due to timing differences in revenue recognition and contract payments relative to the comparable period.
The above declines in cash are offset by a $2.0 million net favourable change in cash relating to timing of income tax payments.
For the year ended December 31, 2023, cash provided by operating activities was $56.8 million compared to $43.5 million in the prior
year. This was the result of a year-over-year increase in contributions from operating segments, augmented by a $2.6 million increase in
cash from changes in non-cash working capital primarily related to the timing of tax payments. This was partially offset by the items
described above for the quarter.
NET CASH FLOW USED IN INVESTING ACTIVITIES
Net cash used in investing activities for the quarter was consistent with the prior year quarter.
Net cash used in investing activities for the year ended December 31, 2023, was $154.9 million compared to $55.6 million in the comparative
period. The current year increase primarily resulted from the Upfront Payment required by the Extension Agreement compared to the
acquisition of Reamined and the UPLevel group of companies in the prior year.
NET CASH FLOW USED IN FINANCING ACTIVITIES
Net cash flow used in financing activities during the quarter was $18.7 million, compared to $16.4 million in the fourth quarter of 2022. As ISC
embarked on its deleveraging strategy, $10.0 million in debt prepayments were made in the quarter, consistent with the comparative
quarter in the prior year. In addition, interest paid increased $2.7 million compared to the prior year quarter due to increased borrowings
associated with the Extension Agreement and an increase in interest rates.
Net cash flow provided by financing activities for the full year was $87.8 million compared to $6.2 million in the prior year, for a net increase
of $81.6 million. Primary drivers of the increase were the following:
• Additional borrowings of $150.7 million with respect to the Upfront Payment and other costs associated with the Extension Agreement,
compared to $40.0 million in borrowings in the prior year to finance the acquisition of Reamined.
•
In line with our deleveraging strategy, ISC voluntarily prepaid $39.0 million in debt during the year, an increase of $24.0 million from the
prior year.
• Similar to the quarterly explanation, interest paid during the year increased over the prior year by $5.6 million to $8.5 million primarily
due to a higher average principal balance outstanding associated with funding the Upfront Payment and higher interest rates, which
increased our cost of borrowing compared to the prior year.
54
MANAGEMENT’S DISCUSSION AND ANALYSIS2023 ISC® Annual Report | Management’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2023
6.2 Sustaining capital expenditures
ISC capital expenditures for the purpose of this analysis include cash additions of sustaining property, plant and equipment and intangible
assets excluding additions subject to business combinations. The capital expenditures listed below also exclude cash paid during the year
of $153.4 million related to the right to manage and operate the Saskatchewan Registries to 2053, which made up part of the intangible
assets capitalized.
These capital expenditures have been excluded from sustaining capital as they are not considered part of business-as-usual activities given
the long-term and transformational nature of the expenditure. Sustaining capital expenditures were $0.9 million for the quarter, compared
to $0.3 million in the prior year quarter and $2.4 million for the year compared to $1.5 million in the prior year. The increase for the quarter
and the year when compared to the prior year periods primarily resulted from increased system development work across our business
segments, including registry enhancements for Registry Operations.
(thousands of CAD)
Registry Operations
Services
Technology Solutions
Corporate and other
Total capital expenditures
6.3 Debt
Three Months Ended December 31,
Year Ended December 31,
2023
28
157
439
234
858
$
$
2022
49
278
(57)
50
320
$
$
2023
189
709
1,066
430
2,394
$
$
2022
19
707
688
50
1,464
$
$
At December 31, 2023, the Company’s debt was $177.3 million compared to $66.0 million at December 31, 2022.
In connection with the Extension Agreement, ISC entered into the Amended and Restated Credit Agreement with its syndicate of lenders
on July 5, 2023. The aggregate amount available under the Credit Facility has been increased from $150.0 million to $250.0 million and
consists of ISC’s existing $150.0 million revolving credit facility together with a new $100.0 million revolving credit facility. In addition, ISC
maintains access to a $100.0 million accordion option, providing the flexibility to upsize the aggregate revolving credit facility up to $350.0
million. The Consolidated Net Funded Debt to EBITDA financial covenant has been increased to provide additional balance sheet flexibility
to ISC. The expiry date of the Credit Facility of September 2026 remains unchanged. ISC funded the Upfront Payment and other related
transaction costs for the Extension by drawing on the Credit Facility.
On July 27, 2023, ISC announced that it has expanded the lenders under the Company’s Credit Facility to include BMO. The syndicated
Credit Facility now includes RBC, CIBC and BMO. The total amount available under the Credit Facility remained unchanged.
The Company was in compliance with all its covenants throughout the period. The amount of borrowing costs capitalized during 2023 and
2022 was nil.
During 2023, the Company made voluntary prepayments of $39.0 million (2022 – $15.0 million) against its revolving credit facility to
minimize interest expense. $10.0 million (2022 – $10.0 million) of the total voluntary prepayments were made in the fourth quarter, which is
consistent with the comparable period. In 2022, the Company borrowed $40.0 million to finance the acquisition of Reamined, offset by
$15.0 million of debt prepayments.
The Company is focused on continuing sustainable growth and deleveraging its balance sheet towards a long-term net leverage target of
2.0x – 2.5x. The prepayments described above are a reflection of deleveraging plans.
For further information on our Credit Facility, refer to Note 15 in the December 31, 2023, Financial Statements, which are available on our
website at www.isc.ca and in the Company’s profile on SEDAR+ at www.sedarplus.ca.
6.4 Total assets
Total assets were $536.3 million at December 31, 2023, compared to $283.5 million at December 31, 2022. Total assets increased during the
year as a result of the acquisition of the $277.6 million intangible asset associated with the right to manage and operate the Saskatchewan
Registries in connection with the signing of the Extension Agreement.
55
MANAGEMENT’S DISCUSSION AND ANALYSISManagement’s Discussion and Analysis | 2023 ISC® Annual ReportFor the Fourth Quarter and Year Ended December 31, 2023
(thousands of CAD)
Total assets excluding intangibles,
goodwill and cash
Intangibles
Goodwill
Cash
Total assets
(thousands of CAD)
Total assets excluding intangibles,
goodwill and cash
Intangibles
Goodwill
Cash
Total assets
6.5 Working capital
Registry
Operations
Services
Technology
Solutions
Corporate As at December 31,
and Other
2023
$ 23,281
303,548
21,098
–
$ 347,927
Registry
Operations
$ 23,667
32,301
21,098
–
$ 77,066
$
17,812
42,322
71,537
–
$ 131,671
Services
$
15,838
51,383
71,537
–
$ 138,758
$
5,843
4,874
8,631
–
$ 19,348
Technology
Solutions
$
4,408
4,638
8,605
–
$ 17,651
$
$
$
$
12,158
1,026
–
24,193
37,377
$ 59,094
351,770
101,266
24,193
$ 536,323
Corporate
As at December 31,
and Other
2022
14,829
671
–
34,479
49,979
$ 58,742
88,993
101,240
34,479
$ 283,454
Between December 31, 2022, and December 31, 2023, working capital decreased by $32.8 million largely driven by the impact of
the Extension.
(thousands of CAD)
Current assets
Current liabilities
Working capital
As at December 31,
2023
As at December 31,
2022
$ 48,332
(63,496)
$ (15,164)
$ 57,216
(39,626)
$ 17,590
The main drivers of the $32.8 million decrease in working capital compared to December 31, 2022, are as follows:
(thousands of CAD)
Cash additions to intangible assets pursuant to the Extension Agreement
Portion financed with long-term debt
Subtotal
Free cash flow for 2023
Financing and other items:
Repayment of long-term debt
Dividends paid
Stock options exercised
Vendor concession liability – current portion
All other
Total change in working capital
$ (153,430)
150,684
(2,746)
45,440
(39,000)
(16,355)
4,379
(20,816)
(3,656)
$ (32,754)
56
MANAGEMENT’S DISCUSSION AND ANALYSIS2023 ISC® Annual Report | Management’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2023
6.6 Outstanding share data
The number of issued and outstanding Class A Shares as at December 31, 2023, was 18,004,641 and the number of issued and outstanding
share options as of December 31, 2023, was 1,005,198. As of March 12, 2024, the date of filing, the number of issued and outstanding Class A
Shares was 18,004,641 and the number of issued and outstanding share options was 1,005,198.
6.7 Common share dividend
On November 7, 2023, the Board declared a quarterly cash dividend of $0.23 per Class A Share, paid on or before January 15, 2024, to
shareholders of record as of December 31, 2023.
6.8 Commitments
The Company has commitments over the next five years that include future minimum payments for leasing of office space, information
technology service agreements and other management services contracts. The following table summarizes our commitments as of
December 31, 2023:
(thousands of CAD)
Operating leases and non-lease
component of office leases1
Information technology2 and other
service agreements
Total
2024
2025
2026
2027
2028
Thereafter
Total
$
1,830
$
1,053
$
763 $
704 $
642 $
512 $
5,504
6,972
8,802
3,749
$ 4,802
3,621
$ 4,384 $ 4,230 $
3,526
3,154
3,796 $
–
21,022
512 $ 26,526
$
1 The Company leases all of its office space and certain office equipment. The office spaces have lease terms of between three and 10 years, with various options to extend.
The office equipment leases relate to photocopiers and have lease terms of three years. The Company does not have an option to purchase the leased assets at the expiry of
the lease period.
2 The Company has service agreements related to Information Technology with various service providers, including lease commitments for computer equipment where the
Company has taken the exemption for low-value assets. Other service agreements relate to service contracts associated with corporate and shared services infrastructure.
7 Business Risks
7.1 Financial instruments and financial risks
Financial instruments held in the normal course of business included in our consolidated statements of financial position as at December 31,
2023, consist of cash, trade and other receivables, accounts payable and accrued liabilities excluding share-based accrued liabilities, the
vendor concession liability and long-term debt.
The Company does not currently use any form of derivative financial instruments to manage our exposure to credit risk, interest rate risk,
market risk or foreign currency exchange risk. Refer to Note 20 to the Financial Statements for information pertaining to financial
instruments and related risk management.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of cash, trade and other receivables, accounts payable and accrued liabilities excluding share-based accrued liabilities
approximate fair value due to their immediate or relatively short-term maturity. The fair values of the vendor concession liability and
long-term debt are estimated by discounting the future contractual cash flows at the cost of borrowing of the Company. With long-term
debt, ISC has its borrowings under the Credit Facility, which is managed with prime loans, CDOR loans and letters of credit. Certain
borrowings will bear interest at a base rate of prime plus applicable margin varying between 0.20 per cent and 3.00 per cent per annum
while other borrowings will bear interest at CDOR rates between 1.20 per cent and 3.00 per cent per annum.
CREDIT RISK
Credit risk is the risk that one party to a transaction will fail to discharge an obligation and cause the other party to incur a financial loss. The
Company extends credit to its customers in the normal course of business and is exposed to credit risk in the event of non-performance by
customers but does not anticipate such non-performance would be material. The Company monitors the credit risk and credit rating of
customers on a regular basis. The Company has significant concentration of credit risk among government sectors. Its customers are
predominantly provincial, federal and municipal government ministries and agencies and its private sector customers are diverse.
57
MANAGEMENT’S DISCUSSION AND ANALYSISManagement’s Discussion and Analysis | 2023 ISC® Annual ReportFor the Fourth Quarter and Year Ended December 31, 2023
The majority of cash is held with Canadian chartered banks and the
Company believes the risk of loss to be minimal. The maximum
exposure to credit risk at December 31, 2023, is $39.9 million
(December 31, 2022 — $49.4 million), equal to the carrying value of
the Company’s financial assets: those being cash at $24.2 million
(December 31, 2022 — $34.5 million) and trade and other
receivables at $15.7 million (December 31, 2022 — $14.9 million).
Quarterly reviews of the aged receivables are completed. The
Company expects to fully collect the carrying value on all
outstanding receivables. Therefore, the risk to the Company is low.
LIQUIDITY RISK
Liquidity risk is the risk that the Company will not be able to meet
its financial obligations as they fall due. The Company’s cash
resources are managed based on financial forecasts and anticipated
cash flows.
MARKET RISK
The Company’s exposure to market risk is limited to the deferred
share units, share appreciation rights and performance share unit
liabilities whose fair values are affected by equity prices.
INTEREST RATE RISK
Interest rate risk arises from the effect of changes in prevailing
interest rates on the Company’s financial instruments. The
Company is subject to interest rate risks on its debt. This debt bears
interest at rates that float, which can vary with changes in prime
borrowing rates. The Company is managing its interest rate risk
through its treasury function, the continued focus on debt
repayment and keeping excess cash in higher interest short-term
savings.
The Company has estimated that a 100 basis point spread in
interest rate for the year ended December 31, 2023 would
increase/decrease comprehensive income by $0.8 million
(2022 — $0.5 million).
FOREIGN CURRENCY EXCHANGE RISK
The Company operates internationally and is exposed to
fluctuations in various currencies, with the euro being the most
material, followed by the US dollar. Movements in foreign currencies
against the Canadian dollar may impact revenue, and the value of
assets and liabilities and affect the Company’s profit and loss. The
Company’s exposure to other currencies is not significant at the end
of the period.
7.2 Business risks and risk management
All companies are exposed to risk and are required to mitigate
risks on a daily and long-term basis. A key component of creating
strong and sustainable corporate performance is to balance risk
and reward.
ISC considers risks that may affect the Company’s ability to achieve
its goals and objectives on an ongoing basis and implements
processes to manage those risks. ISC is continuously monitoring
numerous existing and emerging risks. Our corporate strategies and
plans are designed to implement effective risk mitigation or
management approaches on an ongoing basis.
The Board oversees ISC’s Enterprise Risk Management (“ERM”)
framework. This includes ensuring appropriate management
systems are in place to ensure ISC’s risks are prudently managed.
The senior leadership team is accountable for providing executive
oversight of ISC’s ERM activities, including the ongoing identification
and assessment of risks and the development of mitigation
strategies to manage the corporate risks facing the Company.
A complete list of ISC’s key business risks is contained in the
Company’s Annual Information Form available on the Company’s
website at www.isc.ca and in the Company’s profile on SEDAR+ at
www.sedarplus.com.
8 Accounting Policies, Financial
Measures and Controls
8.1 Off-balance sheet arrangements
The Company had no off-balance sheet arrangements as at
December 31, 2023.
8.2 Related party transactions
Routine operating transactions with related parties are settled at
agreed upon exchange amounts under normal trade terms. Refer to
Note 23 in the December 31, 2023 Financial Statements, which are
available on our website at www.isc.ca and in the Company’s
profile on SEDAR+ at www.sedarplus.ca for information about
transactions with related parties.
8.3 Critical accounting estimates
ISC’s critical accounting estimates are contained in Note 2 to the
Financial Statements under the summary of use of estimates and
judgments and include references to:
• the carrying value, impairment and estimated useful lives of
property, plant and equipment;
• the carrying value, impairment and estimated useful lives of
intangible assets and goodwill;
• the recoverability of deferred tax assets; and
• the amount and timing of revenue from contracts from
customers recognized over time.
The preparation of the Financial Statements, in conformity with
IFRS, requires management to make estimates and underlying
assumptions and judgments that affect the accounting policies and
reported amounts of assets, liabilities, revenue and expenses.
58
MANAGEMENT’S DISCUSSION AND ANALYSIS2023 ISC® Annual Report | Management’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2023 Estimates and underlying assumptions are reviewed on an ongoing basis. Actual results may differ from these estimates. Revisions to
accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Critical accounting
estimates and judgments are those that have a significant risk of causing material adjustment.
8.4 Changes in accounting policies
The Company has adopted the following new accounting pronouncements or policies and revised standards, along with any consequential
amendments, effective January 1, 2023, or on such date as they became applicable. These changes were made in accordance with
applicable transitional provisions.
Proposed Standard Description
Amendments to
IAS 1 and IFRS
Practice Statement
2 –Disclosure of
Accounting Policy
Information
Amendments to
IAS 8 – Definition of
Accounting Estimates
Amendments to IAS
12 – Deferred Tax
related to Assets and
Liabilities arising from
a Single Transaction
IFRS 17 – Insurance
Contracts
The amendments to IAS 1 – Presentation of Financial Statements and IFRS Practice Statement 2 – Making
Materiality Judgements require that an entity discloses its material accounting policies, instead of its
significant accounting policies.
The Company adopted this amendment on January 1, 2023, and has only disclosed material accounting
policies as described in Note 3 to the Notes to the Consolidated Financial Statements.
The amendments introduce a definition of accounting estimates and are intended to help entities
distinguish changes in accounting policies from changes in accounting estimates. Under the new
definition, accounting estimates are “monetary amounts in financial statements that are subject to
measurement uncertainty”. This distinction is important because changes in accounting policies must be
applied retrospectively while changes in accounting estimates are accounted for prospectively.
The Company adopted this amendment to IAS 8 effective January 1, 2023, which has had no impact on
the consolidated financial statements.
The amendments narrow the scope of the initial recognition exemption to clarify that the initial
recognition exemption does not apply to transactions in which equal amounts of deductible and taxable
temporary differences arise on initial recognition.
The Company adopted this amendment to IAS 12 effective January 1, 2023, which has had no impact on
the consolidated financial statements.
IFRS 17 requires insurance liabilities to be measured at a current fulfillment value and provides a more
uniform measurement and presentation approach for all insurance contracts. These requirements are
designed to achieve the goal of a consistent, principle-based accounting for insurance contracts. IFRS 17
supersedes IFRS 4 – Insurance Contracts.
The Company adopted IFRS 17 effective January 1, 2023, and analysed all relevant contracts. There has
been no impact on the consolidated financial statements as a result of the adoption of IFRS 17.
59
MANAGEMENT’S DISCUSSION AND ANALYSISManagement’s Discussion and Analysis | 2023 ISC® Annual ReportFor the Fourth Quarter and Year Ended December 31, 2023
The International Accounting Standards Board and IFRS Interpretations Committee issued the following new standards and amendments
to standards and interpretations, which become effective for future periods.
Proposed Standard Description
Amendments to IAS
1 –Classification of
Liabilities as Current
or Non-current
The amendments to IAS 1 affect only the presentation of liabilities as current or
non- current in the statement of financial position and not the amount or timing of
recognition of any asset, liability, income or expenses, or the information disclosed
about those items.
Effective Date
January 1, 2024
These amendments specify that covenants to be complied with after the reporting
date do not affect the classification of debt as current or non-current at the reporting
date. Instead, the amendments require a company to disclose information about these
covenants in the notes to the financial statements.
The amendments are applied retrospectively for annual periods beginning on or after
January 1, 2024, with early application permitted. This amendment is currently being
assessed by the Company to determine the impact.
Amendments to
IFRS 16 – Lease
liability in a Sale and
Leaseback
Amendments to
IAS 7 and IFRS 7
– Supplier Finance
Arrangements
The amendment clarifies how a seller-lessee subsequently measures sale and leaseback
transactions that satisfy the requirements in IFRS 15 – Revenue from Contracts with
Customers to be accounted for as a sale.
January 1, 2024
The amendment is effective for annual periods beginning on or after January 1, 2024.
The Company has assessed the impact of the adoption of this amendment and it
is not expected to have a material impact on the Company’s consolidated financial
statements.
The amendments add disclosure requirements and ‘signposts’ within existing disclosure
requirements that ask entities to provide qualitative and quantitative information about
supplier finance arrangements.
January 1, 2024
The amendments are effective for annual periods beginning on or after January 1,
2024. The Company has assessed the impact of the adoption of the amendments
and they are not expected to have a material impact on the Company’s consolidated
financial statements.
8.5 Financial measures and key performance indicators
Revenue, expenses, net income and net cash flow provided by operating activities are key performance indicators the Company uses to
manage its business and evaluate its financial results and operating performance. In addition to these results, which are reported in
accordance with IFRS, certain non-IFRS measures are supplemental indicators of operating performance and financial position as well as
used for internal planning purposes. The Company evaluates its performance against these metrics by comparing actual results to
management budgets, forecasts and prior period results. These non-IFRS financial measures include adjusted net income, EBITDA,
EBITDA margin, adjusted EBITDA, adjusted EBITDA margin, free cash flow and adjusted free cash flow. Refer to Section 8.8 “Non-IFRS
financial measures”.
8.6 Internal controls over financial reporting
The Company’s management, including the President and Chief Executive Officer and the Chief Financial Officer, is responsible for
establishing and maintaining appropriate internal controls over financial reporting. Internal controls over financial reporting have been
designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in
accordance with IFRS and management has concluded these controls were operating effectively as of December 31, 2023.
No changes in our internal controls over financial reporting that have occurred during the period have materially affected or are reasonably
likely to materially affect our internal controls over financial reporting.
60
MANAGEMENT’S DISCUSSION AND ANALYSIS2023 ISC® Annual Report | Management’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2023
It should be noted that all internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems
determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
8.7 Disclosure controls and procedures
The Company’s management, including the President and Chief Executive Officer and the Chief Financial Officer, is responsible for
establishing and maintaining appropriate disclosure controls and procedures. Disclosure controls and procedures are designed to provide
reasonable assurance that relevant information is gathered and reported to senior management, including the President and Chief
Executive Officer and the Chief Financial Officer, on a timely basis so that appropriate decisions can be made regarding public disclosures.
Management has concluded these controls were operating effectively as of December 31, 2023.
8.8 Non-IFRS financial measures
This MD&A includes certain measures that have not been prepared in accordance with IFRS, such as adjusted net income, adjusted earnings
per share, basic, adjusted earnings per share, diluted, EBITDA, EBITDA margin, adjusted EBITDA, adjusted EBITDA margin, free cash flow
and adjusted free cash flow. These measures are provided as additional information to complement IFRS measures by providing further
understanding of our financial performance from management’s perspective, to provide investors with supplemental measures of our
operating performance and, thus, highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS
financial measures.
Management also uses non-IFRS measures to facilitate operating performance comparisons from period to period, prepare annual
operating budgets, and assess our ability to meet future capital expenditure and working capital requirements.
Accordingly, these non-IFRS measures should not be considered in isolation or as a substitute for analysis of our financial information
reported under IFRS. Such measures do not have any standardized meaning prescribed by IFRS and therefore may not be comparable to
similar measures presented by other companies.
Non-IFRS performance
measure
Adjusted net income
Adjusted earnings per
share, basic
Adjusted earnings per
share, diluted
Why we use it
How we calculate it
Most comparable IFRS
financial measure
• To evaluate performance and
profitability while excluding
non-operational and share-
based volatility.
• We believe that certain
investors and analysts will
use adjusted net income and
adjusted earnings per share
to evaluate performance
while excluding items that
management believes do not
contribute to our ongoing
operations.
Adjusted net income:
Net income
Earnings per share, basic
Earnings per share,
diluted
Net income
add
Share-based compensation expense,
acquisitions, integration and other
costs, effective interest component of
interest expense, debt finance costs
expensed to professional and consulting,
amortization of the intangible asset
associated with the right to manage and
operate the Saskatchewan Registries,
amortization of registry enhancements,
interest on the vendor concession
liability and the tax effect of these
adjustments at ISC’s statutory tax rate.
Adjusted earnings per share, basic:
Adjusted net income divided by
weighted average number of common
shares outstanding
Adjusted earnings per share, diluted:
Adjusted net income divided by diluted
weighted average number of common
shares outstanding
61
MANAGEMENT’S DISCUSSION AND ANALYSISManagement’s Discussion and Analysis | 2023 ISC® Annual ReportFor the Fourth Quarter and Year Ended December 31, 2023
Non-IFRS performance
measure
EBITDA
EBITDA margin
Adjusted EBITDA
Adjusted EBITDA margin
Free cash flow
Most comparable IFRS
financial measure
Net income
Net income
Net cash flow provided
by operating activities
Why we use it
How we calculate it
• To evaluate performance and
profitability of segments and
subsidiaries as well as the
conversion of revenue.
• We believe that certain
investors and analysts use
EBITDA to measure our ability
to service debt and meet other
performance obligations.
• To evaluate performance and
profitability of segments and
subsidiaries as well as the
conversion of revenue while
excluding non-operational and
share-based volatility.
• We believe that certain
investors and analysts use
adjusted EBITDA to measure
our ability to service debt
and meet other performance
obligations.
• Adjusted EBITDA is also used as
a component of determining
short-term incentive
compensation for employees.
• To show cash available for debt
repayment and reinvestment
into the Company on a levered
basis.
• We believe that certain
investors and analysts use this
measure to value a business
and its underlying assets.
• Free cash flow is also used as
a component of determining
short-term incentive
compensation for employees.
EBITDA:
Net income
add (remove)
Depreciation and amortization, net
finance expense, and income tax
expense
EBITDA margin:
EBITDA
divided by
Total revenue
Adjusted EBITDA:
EBITDA
add (remove)
share-based compensation expense,
acquisition, integration and other costs,
gain/loss on disposal of assets and asset
impairment charges if significant
Adjusted EBITDA margin:
Adjusted EBITDA
divided by
Total revenue
Free cash flow:
Net cash flow provided by operating
activities
deduct (add)
Net change in non-cash working capital,
cash additions to property, plant and
equipment, cash additions to intangible
assets, interest received and paid as well
as interest paid on lease obligations
and principal repayments on lease
obligations
62
MANAGEMENT’S DISCUSSION AND ANALYSIS2023 ISC® Annual Report | Management’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2023 Non-IFRS performance
measure
Adjusted free cash flow
Most comparable IFRS
financial measure
Net cash flow provided
by operating activities
Why we use it
How we calculate it
Adjusted free cash flow:
Free cash flow
deduct (add)
Share-based compensation expense,
acquisition, integration and other costs
and registry enhancement capital
expenditures
• To show cash available for debt
repayment and reinvestment
into the Company on a
levered basis from continuing
operations while excluding
non-operational and share-
based volatility.
• We believe that certain
investors and analysts use this
measure to value a business
and its underlying assets based
on continuing operations while
excluding short term non-
operational items.
8.9 Non-IFRS financial measures definition
Adjusted net income is defined as net income adjusted for share-based compensation expense or income, acquisition, integration
and other costs, the effective interest component of interest expense, amortization of the intangible asset associated with the
right to manage and operate the Saskatchewan Registries and amortization of registry enhancement capital expenditures, interest
on the vendor concession liability and the tax effect of these adjustments at ISC’s statutory tax rate. We believe this measure
provides useful information to evaluate earnings while excluding non-operational and share-based volatility.
EBITDA is defined as earnings before interest, taxes, depreciation and amortization expense. Adjusted EBITDA adjusts EBITDA for
share-based compensation expense or income, transactional gains or losses on assets, asset impairment charges and acquisition,
integration and other costs. These measures, in addition to net income and income from operations, remove fluctuations caused
by the above adjustments. EBITDA margin and adjusted EBITDA margin are calculated as a percentage of overall revenue.
Free cash flow is used as a financial measure of liquidity and financial strength. By adjusting for the swings in non-cash working
capital items due to seasonality or other timing issues, and cash additions to property, plant and equipment and intangible assets,
as well as interest received and paid including interest paid on lease obligations and principal repayments on lease obligations,
free cash flow assists in the long-term assessment of liquidity and financial strength. Adjusted free cash flow adjusts for share-
based compensation expense or recovery, acquisition, integration and other costs and registry enhancement capital expenditures.
Adjusted free cash flow does not represent residual cash flow available for discretionary expenditures.
63
MANAGEMENT’S DISCUSSION AND ANALYSISManagement’s Discussion and Analysis | 2023 ISC® Annual ReportFor the Fourth Quarter and Year Ended December 31, 2023 CONSOLIDATED
FINANCIAL
STATEMENTS
For the Year Ended December 31, 2023
Management’s Responsibility...............................................65
14 Share-Based Compensation Plans ............................. 90
Independent Auditor’s Report ............................................ 66
15 Debt ..................................................................................... 94
Consolidated Statements of Financial Position ............. 69
16 Vendor Concession Liability ........................................ 96
Consolidated Statements of Comprehensive Income 70
17
Liabilities Arising from Financing Activities ............ 96
Consolidated Statements of Changes in Equity ..............71
18 Earnings Per Share ...........................................................97
Consolidated Statements of Cash Flows .......................... 72
19 Equity and Capital Management .................................97
Notes to the Consolidated Financial Statements ............. 73
20 Financial Instruments and Related
1 Nature of the Business ................................................... 73
2 Basis of Presentation ...................................................... 73
3
Material Accounting Policy Information ................. 75
4 Trade and Other Receivables .......................................82
5 Contract Assets ................................................................82
6 Property, Plant and Equipment ...................................83
7 Right-of-use Assets ........................................................ 84
8
Intangible Assets ..............................................................85
9 Goodwill ............................................................................. 86
10
Accounts Payable and
Accrued Liabilities ............................................................87
11 Contract Liabilities ...........................................................87
12 Lease Obligations ............................................................ 88
13 Tax Provision ..................................................................... 88
Risk Management .......................................................... 98
21 Revenue .............................................................................101
22 Interest expense .............................................................102
23 Related Party Transactions .........................................102
24 Compensation of Key
Management Personnel ...............................................102
25 Segment Information ...................................................103
26 Net Change in Non-Cash
Working Capital ...............................................................105
27 Acquisitions ......................................................................105
28 Commitments and Contingencies ........................... 106
29 Pension Expense ............................................................ 107
30 Subsequent Events ....................................................... 107
64
2023 ISC® Annual Report | Consolidated Financial Statements
Consolidated Financial Statements | 2023 ISC® Annual Report
PB
CONSOLIDATED FINANCIAL STATEMENTSFor the Fourth Quarter and Year Ended December 31, 2023 Management’s Responsibility
Management’s Report on Consolidated Financial Statements
The accompanying consolidated financial statements of Information Services Corporation were prepared by management, which is
responsible for the integrity and fairness of the information presented, including the many amounts that must, of necessity, be based on
estimates and judgments. These consolidated financial statements were prepared in accordance with International Financial Reporting
Standards as issued by the International Accounting Standards Board. Financial information appearing throughout our Management’s
Discussion and Analysis is consistent with these consolidated financial statements.
In discharging our responsibility for the integrity and fairness of the consolidated financial statements and for the accounting
systems from which they are derived, we maintain the necessary system of internal controls designed to ensure that transactions are
authorized, assets are safeguarded and proper records are maintained. These controls include quality standards in hiring employees,
policies and procedure manuals, a corporate code of conduct and accountability for performance within appropriate and well-defined
areas of responsibility.
The Board of Directors oversees management’s responsibilities for financial reporting through an Audit Committee, which is composed
entirely of directors who are neither officers nor employees of Information Services Corporation. This Committee reviews our
consolidated financial statements and recommends them to the Board of Directors for approval. Other key responsibilities of the Audit
Committee include reviewing our existing internal control procedures and planned revisions to those procedures and advising the
directors on accounting matters and financial reporting issues.
Deloitte LLP, who was appointed by the shareholders of Information Services Corporation upon the recommendation of the
Audit Committee and the Board of Directors’ approval, has performed an independent audit of the consolidated financial statements
and that report follows. The auditor has full and unrestricted access to the Audit Committee to discuss the audit and related findings.
Shawn B. Peters, CPA, CA, ICD.D
President and Chief Executive Officer
Robert (Bob) Antochow, CPA, CA, CMA
Chief Financial Officer
March 12, 2024
PB
2023 ISC® Annual Report | Consolidated Financial Statements
Consolidated Financial Statements | 2023 ISC® Annual Report
65
CONSOLIDATED FINANCIAL STATEMENTSFor the Fourth Quarter and Year Ended December 31, 2023
Independent Auditor’s Report
To the Shareholders and the Board of Directors of Information Services Corporation:
Opinion
We have audited the consolidated financial statements of Information Services Corporation (the “Company”), which comprise the
consolidated statements of financial position as at December 31, 2023 and December 31, 2022, and the consolidated statements of
comprehensive income, changes in equity and cash flows for the years then ended, and notes to the consolidated financial statements,
including material accounting policy information (collectively referred to as the “financial statements”).
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at
December 31, 2023 and 2022, and its financial performance and its cash flow for the years then ended in accordance with International
Financial Reporting Standards (“IFRS”).
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards (“Canadian GAAS”). Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are
independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in
Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial
statements for the year ended December 31, 2023. These matters were addressed in the context of our audit of the consolidated financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Goodwill – Services and Technology Solutions — refer to Notes 3 and 9 to the financial statements
Key Audit Matter Description
The Company’s annual assessment for goodwill impairment involves the comparison of the recoverable amount of each cash generating unit
(“CGU”) to its carrying value. The Company determines the recoverable amount of its CGUs based on a value in use (“VIU”) analysis under the
income approach. The Company used the discounted cash flow method to determine the recoverable amount of the Services and
Technology Solutions CGUs, which required management to make estimates and assumptions. The recoverable amounts for both the
Services and Technology Solutions CGUs exceeded its carrying value as of the measurement date and no impairment was recognized.
Given the magnitude of the goodwill balance in the Services and Technology Solutions CGUs, the performance of audit procedures over
revenue forecasts, perpetual growth rates and the discount rates for both CGUs required an increased extent of audit effort, including the
need to involve fair value specialists.
How the Key Audit Matter Was Addressed in the Audit
Our audit procedures related to the revenue forecasts, perpetual growth rates and the discount rates used to determine the recoverable
amount of the Services and Technology Solutions CGUs included the following, among others:
• Evaluated management’s ability to accurately forecast by comparing management’s historical forecasts to actual results;
• Evaluated the reasonableness of management’s revenue forecasts by comparing to (1) historical results, (2) internal communications to
management and the Board of Directors, (3) forecasted information included in Company press releases, analyst and industry reports
and by assessing management’s pipeline for the Technology Solutions CGU;
• With the assistance of fair value specialists
– Evaluated the perpetual growth rates by comparing management’s selected perpetual growth rates to forecasted inflationary and
economic growth applicable to Canada.
– Evaluated the discount rates by testing the source information underlying the determination of the discount rates and developing a
range of independent discount rates and comparing to the discount rates selected by management.
66
2023 ISC® Annual Report | Consolidated Financial Statements
Consolidated Financial Statements | 2023 ISC® Annual Report
67
CONSOLIDATED FINANCIAL STATEMENTSFor the Fourth Quarter and Year Ended December 31, 2023 Extension and Amendment of Master Services Agreement – Refer to Notes 1, 8 and 16 to the
financial statements
Key Audit Matter Description
On July 5, 2023, the Company entered into an extension agreement to extend the term of its exclusive Master Service Agreement (the
“MSA”) with the Province of Saskatchewan to manage and operate the Saskatchewan Land Registry, the Saskatchewan Land Surveys
Directory, the Saskatchewan Corporate Registry and the Saskatchewan Personal Property Registry until 2053. As a result of the MSA, the
Company recorded a contract, customer and partner relationships intangible asset (“intangible asset”), a vendor concession liability, a
deferred tax asset and a deferred tax liability. The intangible asset and vendor concession liability are determined based on future cashflows
(contractual payments) and discount rate.
Management was required to make judgments to determine the accounting treatment of the MSA and as such, auditing that accounting
treatment required complex analysis and consideration. The assumption with the highest degree of subjectivity and judgement used to
value the intangible asset and vendor concession liability is the discount rate. Auditing such required a high degree of auditor judgement
and an increased extent of audit effort, including the need to involve technical accounting, tax and fair value specialists.
How the Key Audit Matter Was Addressed in the Audit
Our audit procedures related to the accounting treatment of the MSA and the discount rate used to value the intangible asset and the
vendor concession liability included the following, among others:
• With the assistance of technical accounting and tax specialists evaluated the accounting treatment of the MSA by:
– Assessing the information in the MSA to evaluate that all relevant factors were analyzed;
– Evaluating management’s determination of the accounting treatment of the MSA by analyzing specific facts and circumstances against
relevant accounting guidance;
– Assessing the tax implications related to the MSA to determine that recording a deferred tax asset and liability is appropriate;
• With the assistance of fair value specialists evaluated the discount rate by testing the source information underlying the determination of
the discount rate and developing a range of independent discount rates and comparing to the discount rate selected by management.
Other Information
Management is responsible for the other information. The other information comprises:
• Management’s Discussion and Analysis
• The information, other than the financial statements and our auditor’s report thereon, in the Annual Report.
Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance
conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information identified
above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge
obtained in the audit, or otherwise appears to be materially misstated.
We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the work we have performed on
this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in this
auditor’s report. We have nothing to report in this regard.
The Annual Report is expected to be made available to us after the date of the auditor’s report. If, based on the work we will perform on this
other information, we conclude that there is a material misstatement of this other information, we are required to report that fact to those
charged with governance.
Responsibilities of Management and Those Charged with Governance for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS, and for such
internal control as management determines is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either
intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
66
2023 ISC® Annual Report | Consolidated Financial Statements
Consolidated Financial Statements | 2023 ISC® Annual Report
67
CONSOLIDATED FINANCIAL STATEMENTSFor the Fourth Quarter and Year Ended December 31, 2023 We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
Auditor’s Responsibilities for the Audit of the Financial Statements
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear
on our independence, and where applicable, related safeguards.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with Canadian GAAS will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
From the matters communicated with those charged with governance, we determine those matters that were of most significance
in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe
these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely
rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform
audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
As part of an audit in accordance with Canadian GAAS, we exercise professional judgment and maintain professional skepticism throughout
the audit. We also:
The engagement partner on the audit resulting in this independent auditor’s report is Brian Ralofsky.
•
Chartered Professional Accountants
Regina, Saskatchewan
March 12, 2024
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made
by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability
to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions
are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the
Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial
statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company
to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit.
We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the
audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in
our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Brian Ralofsky.
Chartered Professional Accountants
Regina, Saskatchewan
March 12, 2024
68
2023 ISC® Annual Report | Consolidated Financial Statements
Consolidated Financial Statements | 2023 ISC® Annual Report
69
CONSOLIDATED FINANCIAL STATEMENTSFor the Fourth Quarter and Year Ended December 31, 2023 Consolidated Statements of Financial Position
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit
As at December 31,
and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
(thousands of CAD)
2022
Note
As at December 31,
2023
Income tax recoverable
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements
Assets
regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear
Current assets
on our independence, and where applicable, related safeguards.
Cash
Trade and other receivables
From the matters communicated with those charged with governance, we determine those matters that were of most significance
Contract assets
in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe
these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely
Prepaid expenses and deposits
rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of
Total current assets
doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Non-current assets
Property, plant and equipment
The engagement partner on the audit resulting in this independent auditor’s report is Brian Ralofsky.
Right-of-use assets
Intangible assets
24,193
15,673
2,649
2,626
3,191
48,332
34,479
14,933
985
2,215
4,604
57,216
4
5
13
$
$
Goodwill
Deferred tax asset
Total non-current assets
Total assets
Chartered Professional Accountants
Regina, Saskatchewan
Liabilities
March 12, 2024
Current liabilities
Accounts payable and accrued liabilities
Vendor concession liability
Contract liabilities
Lease obligations – current portion
Income tax payable
Total current liabilities
Non-current liabilities
Lease obligations
Deferred tax liability
Long-term debt
Vendor concession liability
Other liabilities
Total non-current liabilities
Shareholders’ equity
Share capital
Equity settled employee benefit reserve
Accumulated other comprehensive loss
Retained earnings
Total shareholders’ equity
Total liabilities and shareholders’ equity
See Note 28 for Commitments and Contingencies
See accompanying Notes
6
7
8
9
13
10
16
11
12
13
12
13
15
16
14
19
14
$
$
$
2,101
8,682
351,770
101,266
24,172
487,991
536,323
36,114
20,816
2,764
2,809
993
63,496
7,055
11,257
177,302
107,720
714
304,048
28,542
1,610
(185)
138,812
168,779
536,323
1,813
7,553
88,993
101,240
26,639
226,238
283,454
33,876
–
2,720
2,299
731
39,626
6,508
13,883
66,047
–
1,802
88,240
23,691
2,082
(377)
130,192
155,588
283,454
$
$
$
68
2023 ISC® Annual Report | Consolidated Financial Statements
Consolidated Financial Statements | 2023 ISC® Annual Report
69
APPROVED BY THE BOARD OF DIRECTORS ON MARCH 12, 2024:
Joel Teal
Director
Laurie Powers
Director
CONSOLIDATED FINANCIAL STATEMENTSFor the Fourth Quarter and Year Ended December 31, 2023
Consolidated Statements of Comprehensive Income
Note
21
6, 7, 8
(thousands of CAD)
Revenue
Expenses
Wages and salaries
Cost of goods sold
Depreciation and amortization
Information technology services
Occupancy costs
Professional and consulting services
Financial services
Other
Total expenses
Net income before items noted below
Finance income (expense)
Interest income
Interest expense
Net finance expense
Income before tax
Income tax expense
Net income
Other comprehensive income (loss)
Items that may be subsequently reclassified to net income
Unrealized gain (loss) on translation of financial
statements of foreign operations
Change in fair value of marketable securities, net of tax
Other comprehensive income (loss)
Total comprehensive income
Earnings per share ($ per share)
Total, basic
Total, diluted
See accompanying Notes
22
13
18
18
Year Ended December 31,
2023
Year Ended December 31,
2022
$
214,520
$
189,895
59,999
55,387
20,506
13,280
4,648
5,981
3,077
3,669
166,547
47,973
1,163
(14,346)
(13,183)
34,790
(9,745)
25,045
192
–
192
25,237
1.41
1.39
$
$
$
$
54,267
49,215
14,735
10,584
4,003
4,988
2,669
3,239
143,700
46,195
463
(3,640)
(3,177)
43,018
(12,249)
30,769
(33)
11
(22)
30,747
1.75
1.71
$
$
$
$
70
2023 ISC® Annual Report | Consolidated Financial Statements
Consolidated Financial Statements | 2023 ISC® Annual Report
71
CONSOLIDATED FINANCIAL STATEMENTSFor the Fourth Quarter and Year Ended December 31, 2023
Consolidated Statements of Changes in Equity
(thousands of CAD)
Note
Balance at January 1, 2022
Net income
Other comprehensive loss
Stock option recovery
Stock options exercised
Dividend declared
Balance at December 31, 2022
Balance at January 1, 2023
Net income
Other comprehensive income
Stock options exercised
Dividend declared
Balance at December 31, 2023
See accompanying Notes
14
14
19
14
19
Accumulated
Other
Share Comprehensive
Income
Capital
Retained
Earnings
115,641
30,769
–
–
–
(16,218)
130,192
$
$
$
$
19,955
–
–
–
3,736
–
23,691
$
130,192
25,045
–
–
(16,425)
$ 138,812
$
23,691
–
–
4,851
–
$ 28,542
Equity
Reserve
2,464
–
–
(7)
(375)
–
2,082
(355)
–
(22)
–
–
–
(377)
$
$
$
(377)
–
192
–
–
2,082
–
–
(472)
–
(185) $ 1,610
Total
$ 137,705
30,769
(22)
(7)
3,361
(16,218)
$ 155,588
$ 155,588
25,045
192
4,379
(16,425)
$ 168,779
$
$
$
$
70
2023 ISC® Annual Report | Consolidated Financial Statements
Consolidated Financial Statements | 2023 ISC® Annual Report
71
CONSOLIDATED FINANCIAL STATEMENTSFor the Fourth Quarter and Year Ended December 31, 2023
Consolidated Statements of Cash Flows
(thousands of CAD)
Operating
Net income
Add: Charges not affecting cash
Depreciation
Amortization
Foreign exchange gains
Deferred tax recovery recognized in net income
Registry Operations service concession arrangement
Gain on disposal of property, plant and equipment
Net finance expense
Stock option recovery
Net change in non-cash working capital
Net cash flow provided by operating activities
Investing
Interest received
Cash received on disposal of property, plant
and equipment
Short-term investments realized
Additions to property, plant and equipment
Additions to intangible assets
Acquisitions and post-closing adjustments
Net cash flow used in investing activities
Financing
Interest paid
Interest paid on lease obligations
Principal repayments on lease obligations
Repayment of short-term debt
Repayment of long-term debt
Proceeds of long-term debt
Financing fees
Dividends paid
Stock options exercised
Net cash flow provided by financing activities
Effects of exchange rate changes on cash held in
foreign currencies
Decrease in cash
Cash, beginning of year
Cash, end of year
See accompanying Notes
Note
Year Ended December 31,
2023
Year Ended December 31,
2022
$
25,045
$
30,769
6, 7
8
13
21
14
26
6
8
27
22
12, 22
12
15
15
15
15
19
14
3,022
17,484
(3)
(155)
(588)
(1)
13,183
–
(1,216)
56,771
1,163
1
–
(394)
(155,430)
(226)
(154,886)
(8,533)
(400)
(2,383)
–
(39,000)
150,684
(593)
(16,355)
4,379
87,799
30
(10,286)
34,479
24,193
$
2,920
11,815
(189)
(111)
(997)
(4)
3,177
(7)
(3,837)
43,536
463
4
49
(574)
(890)
(54,671)
(55,619)
(2,902)
(403)
(2,137)
(500)
(15,000)
40,000
–
(16,172)
3,361
6,247
211
(5,625)
40,104
34,479
$
72
2023 ISC® Annual Report | Consolidated Financial Statements
Consolidated Financial Statements | 2023 ISC® Annual Report
73
CONSOLIDATED FINANCIAL STATEMENTSFor the Fourth Quarter and Year Ended December 31, 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
2 Basis of Presentation
Statement of compliance
1 Nature of the Business
Information Services Corporation is the parent company of its
subsidiary group (collectively, the “Company”, or “ISC”) and is a
Canadian corporation with its Class A Limited Voting Shares (“Class
A Shares”) listed on the Toronto Stock Exchange (“TSX”) under the
symbol ISV. The Company is a provider of registry and information
management services for public data and records. The head and
registered office of the Company is 300 – 10 Research Drive,
Regina, Saskatchewan, S4S 7J7. The Company maintains Canadian
office locations in Saskatchewan, British Columbia and Ontario and
international offices in Ireland and Luxembourg. ISC has three
reportable segments: Registry Operations, Services and Technology
Solutions. A functional summary of these segments is as follows:
• Registry Operations delivers registry and information
services on behalf of governments and private sector
organizations. This segment currently has two major clients
- the Government of Saskatchewan and the Government of
Ontario. Registry Operations offerings are categorized into two
divisions, Saskatchewan Registries and Ontario Property Tax
Assessment Services.
– On July 5, 2023, the Company entered into an extension
agreement (the “Extension Agreement”) to extend ISC’s
exclusive right to manage and operate the Saskatchewan
Land Registry, the Saskatchewan Land Surveys Directory,
the Saskatchewan Corporate Registry and the Saskatchewan
Personal Property Registry (collectively, the “Saskatchewan
Registries”) until 2053. Under the Extension Agreement, ISC
also undertook to renew the registry technology systems
and was granted the right to introduce and/or enhance fees
on certain transactions. Applicable fee adjustments became
effective July 29, 2023. The master service agreement was also
amended and restated (the “Amended and Restated MSA”) to,
among other things, implement certain incremental terms and
conditions including registry enhancement, the objectives of
which are to enhance security features and protocols for the
Saskatchewan Registries, contemplate emerging and future
technology enhancements, refresh and clarify governance
practices and structure and provide flexibility for change over
the life of the extended term.
• Services delivers solutions uniting public records data, customer
authentication, corporate services, collateral management,
asset recovery and accounts receivable management to support
registration, due diligence and lending practices across Canada.
• Technology Solutions provides the development, delivery and
support of registry (and related) technology solutions.
The balance of our corporate activities and shared services
functions is reported as Corporate and other.
As at December 31, 2023, ISC’s principal revenue-generating
segments were Registry Operations and Services.
These consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards
(“IFRS”), as issued by the International Accounting Standards
Board (“IASB”).
The Company’s Board of Directors (the “Board”) authorized the
consolidated financial statements for the year ended December 31,
2023, for issue on March 12, 2024.
Basis of measurement
The consolidated financial statements have been prepared on a
going concern basis using the historical cost basis except for
financial instruments that are measured at fair values at the end of
each reporting period, as explained in the accounting policies below.
Historical cost is generally based on the fair value of the
consideration given in exchange for goods and services.
Fair value is the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market
participants at the measurement date, regardless of whether that
price is directly observable or estimated using another valuation
technique. In estimating the fair value of an asset or a liability, the
Company takes into account the characteristics of the asset or
liability if market participants would take those characteristics into
account when pricing the asset or liability at the measurement date.
Fair value for measurement and/or disclosure purposes in these
consolidated financial statements is determined on such a basis,
except for share-based payment transactions that are within the
scope of IFRS 2 — Share-based Payment and measurements that
have some similarities to fair value but are not fair value, such as net
realizable value in International Accounting Standard (“IAS”) 2 —
Inventories or value in use in IAS 36 — Impairment of Assets.
In addition, for financial reporting purposes, fair value
measurements are categorized into Level 1, 2 or 3 based on the
degree to which the inputs to the fair value measurements are
observable and the significance of the inputs to the fair value
measurement in its entirety, which are described as follows:
• Level 1 inputs are quoted prices (unadjusted) in active markets
for identical assets or liabilities that the entity can access at the
measurement date;
• Level 2 inputs are inputs, other than quoted prices included
within Level 1, that are observable for the asset or liability, either
directly or indirectly; and
• Level 3 inputs are unobservable inputs for the asset or liability.
Functional and presentation currency
These consolidated financial statements are presented in
Canadian dollars (“CAD”), which is the functional currency of the
parent company.
72
2023 ISC® Annual Report | Consolidated Financial Statements
Consolidated Financial Statements | 2023 ISC® Annual Report
7373
Notes to the Consolidated Financial Statements | 2023 ISC® Annual ReportFor the Fourth Quarter and Year Ended December 31, 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Basis of consolidation
The consolidated financial statements incorporate the financial statements of ISC and its wholly owned significant operating subsidiaries:
ISC Saskatchewan Inc. (“ISC Sask”), ISC Enterprises Inc. (“ISC Ent”), ESC Corporate Services Ltd. (“ESC”), Reamined Systems Inc.
(“Reamined”), Enterprise Registry Solutions Limited (“ERS”), Credit Risk Management Canada Ltd. (“CRM”), Credit Bureau of Stratford
(1970) Limited (“CBS”) and Regulis S.A. (“Regulis”). All intragroup assets and liabilities, equity, income, expenses and cash flows are
eliminated in full on consolidation.
Use of estimates and judgments
The preparation of these consolidated financial statements, in conformity with IFRS, requires management to make estimates and underlying
assumptions and judgments that affect the accounting policies and reported amounts of assets, liabilities, revenue and expenses.
Estimates and underlying assumptions are reviewed on an ongoing basis. Actual results may differ from these estimates. Revisions to
accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Critical accounting
estimates and judgments are those that have a significant risk of causing material adjustment. Management believes that the following are
the significant accounting estimates and judgments used in the preparation of the consolidated financial statements:
• the carrying value, impairment and estimated useful lives of property, plant and equipment (Note 6);
• the carrying value, impairment and estimated useful lives of intangible assets (Note 8) and goodwill (Note 9);
• the recoverability of deferred tax assets (Note 13); and
• the amount and timing of revenue from contracts from customers recognized over time (Note 21).
The relevant accounting policies in Note 3 contain further details on the use of these estimates and assumptions.
Changes in accounting policies
The Company adopted the following new accounting pronouncements or policies and revised standards, along with any consequential
amendments, effective January 1, 2023, or on such date as they became applicable. These changes were made in accordance with
applicable transitional provisions.
Standard
Description
Amendments to
IAS 1 and IFRS
Practice Statement
2 –Disclosure of
Accounting Policy
Information
Amendments to
IAS 8 – Definition of
Accounting Estimates
The amendments to IAS 1 — Presentation of Financial Statements and IFRS Practice Statement 2 —
Making Materiality Judgements require that an entity discloses its material accounting policies, instead of
its significant accounting policies.
The Company adopted this amendment on January 1, 2023, and has only disclosed material accounting
policies as described in Note 3 to the Notes to the Consolidated Financial Statements.
The amendments introduce a definition of accounting estimates and are intended to help entities
distinguish changes in accounting policies from changes in accounting estimates. Under the new
definition, accounting estimates are “monetary amounts in financial statements that are subject to
measurement uncertainty”. This distinction is important because changes in accounting policies must be
applied retrospectively while changes in accounting estimates are accounted for prospectively.
The Company adopted this amendment to IAS 8 effective January 1, 2023, which has had no impact on
the consolidated financial statements.
Amendments to IAS
12 – Deferred Tax
related to Assets and
Liabilities arising from
a Single Transaction
The amendments narrow the scope of the initial recognition exemption to clarify that the initial
recognition exemption does not apply to transactions in which equal amounts of deductible and taxable
temporary differences arise on initial recognition.
The Company adopted this amendment to IAS 12 effective January 1, 2023, which has had no impact on
the consolidated financial statements.
74
2022 ISC® Annual Report | Notes to the Consolidated Financial Statements
For the Fourth Quarter and Year Ended December 31, 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Standard
Description
IFRS 17 – Insurance
Contracts
IFRS 17 requires insurance liabilities to be measured at a current fulfillment value and provides a more
uniform measurement and presentation approach for all insurance contracts. These requirements are
designed to achieve the goal of a consistent, principle-based accounting for insurance contracts. IFRS 17
supersedes IFRS 4 Insurance Contracts.
The Company adopted IFRS 17 effective January 1, 2023, and analysed all relevant contracts. There has
been no impact on the consolidated financial statements as a result of the adoption of IFRS 17.
3 Material Accounting Policy Information
Revenue
The Company recognizes revenue either at a point in time or over
time as determined by an analysis of the terms and performance
conditions of each individual customer contract on a contract-by-
contract basis. The individual contract terms determine whether,
when and the amount of the revenue recognized.
The Company considers and assesses enforceability, collectability,
contract combinations and modifications as part of the revenue
recognition process.
The revenue recognition policies associated with each of the
Company’s revenue streams are as follows:
Registry Operations revenue
Registry Operations delivers registry and information services on
behalf of governments and private sector organizations. This
segment currently has two major clients - the Government of
Saskatchewan and the Government of Ontario.
Our offerings are categorized into two divisions, Saskatchewan
Registries and Ontario Property Tax Assessment Services.
Saskatchewan Registries’ division revenue is recognized under the
Amended and Restated MSA and is generated by earning fees from
end-use customers through registrations, searches, maintenance
transactions and value-added services on behalf of the Government
of Saskatchewan.
The majority of the associated transaction fees under the Amended
and Restated MSA are based on a flat price per transaction or a
percentage of the transaction value (ad valorem), or stand-alone
selling price for each distinct service that is recognized at a point in
time. There is a smaller amount of fees generated under the
Amended and Restated MSA related to programs and other
registries whereby the Company earns an annual operating fee or
hosting and management fees versus revenue per transaction.
Revenue from annual operating fees and hosting and management
contracts is recognized over time on a monthly basis.
A smaller portion of revenue in the Saskatchewan Land Registry is
from value-added services and relates to our Geomatics business.
Geomatics revenue is contract dependent, based on the distinct
goods or service promised to the customer, and is either
recognized at a point in time or over time for support and
maintenance contracts.
The Ontario Property Tax Assessment Services division has an
exclusive agreement with the Government of Ontario (the “OPTA
Agreement”) by which Ontario Property Tax Assessment Services
provides online property tax analysis services to over 440
municipalities in Ontario, facilitating the management of property
tax rates and distribution. Revenue is recognized over time
throughout the term of the OPTA Agreement.
Amounts received from customers in advance of the satisfaction of
our performance obligations are recorded as “contract liabilities” on
our consolidated statements of financial position. Amounts in
“contract liabilities” are recognized as revenue as we render services
to our customers.
Services revenue
Services delivers solutions uniting public records data, customer
authentication, corporate services, collateral management, asset
recovery and accounts receivable management to support
registration, due diligence and lending practices across Canada.
The Company categorizes its Services revenue into three
divisions, namely Corporate Solutions, Regulatory Solutions and
Recovery Solutions.
Corporate Solutions captures revenue from nationwide search,
business name registration and corporate filing services sold
primarily to legal professionals or to the general public directly or
indirectly through our government relationships. It further derives
revenue from our corporate supplies business where our customers
include legal professionals and the general public. Revenue for
Corporate Solutions is recognized at a point in time when services
are rendered, or goods are delivered.
Regulatory Solutions captures revenue from our Know-Your-
Customer, collateral management and general due diligence service
offerings. The Company uses its proprietary platform to assist
customers with intuitive business rules and advanced automation
to deliver regulatory services to support their credit/banking and
legal processes. Public registry data is leveraged to provide insights
and improved customer experience through a single technology.
Our technology is supplemented with deep subject-matter
2022 ISC® Annual Report | Notes to the Consolidated Financial Statements
75
Notes to the Consolidated Financial Statements | 2023 ISC® Annual ReportFor the Fourth Quarter and Year Ended December 31, 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
knowledge offered through our legal professionals in three locations
(Montreal, Que.; Toronto, Ont.; and Vernon, B.C.). Revenue for
Regulatory Solutions is recognized at a point in time when services
are rendered.
Recovery Solutions offers fully-managed asset recovery
accompanied by accounts receivable management services to our
customers. Recovery Solutions allows us to provide our customers
with a full service offering across the credit life cycle from
origination to recovery. Asset recovery involves the identification,
retrieval and disposal of movable assets such as automobiles, boats,
aircraft and other forms of portable physical assets used as
collateral security for primarily consumer-focused credit
transactions. Accounts receivable management involves the
Company, as a licenced collection agency, performing recovery
services related to past due accounts in both a first-party capacity
representing our customers, and a third-party collections capacity.
Recovery Solutions revenue in our Services segment includes
administration fees and commissions earned by the provision of
asset recovery and accounts receivable management services.
Administration fee revenue is earned over time throughout the
management of each asset recovery file or in accordance with each
accounts receivable management contract. Commissions and other
revenue is earned at a point in time when services are delivered. In
the case of commissions, they are not recognized until any variable
component can be determined with sufficient certainty such that a
significant reversal in the amount recognized will not occur.
Much of our Services revenue involves interacting with government
registries to access public records to provide services to our
customers. For this access, our Services segment usually pays a fee
to the government. Where we provide simple searches to our
customers, government fees are not included in our revenue
(government fees are recorded on a net basis) as they are passed
through to our customers. Where our services include a number of
collateral management services, government fees are a key input to
these services and are recorded in revenue (government fees are
recorded on a gross basis) as well as cost of goods sold.
Technology Solutions revenue
Technology Solutions provides the development, delivery and
support of registry (and related) technology solutions, generating
revenue through the following:
• sale of software licences related to the technology platform;
• provision of technology solution definition and implementation
services; and
• provision of monthly hosting, support and maintenance services.
Licensing revenue is determined by assessing each individual
contract to determine whether the licence obligation is distinct
from the other performance obligations within the contract. The
Company may have various types of licence obligations depending
on the contract:
•
If the licence obligation is distinct, the Company determines if the
licence should be recognized at a point in time (“right to use”) or
over time (“right to access”) throughout the licence period.
– For contracts that provide the customer with a right to use
the Company’s intellectual property (“IP”) at a point in time,
licence revenue is recognized once the technology is available
for use and the control over the right to use the IP is transferred
to the customer.
– For contracts that provide the customer with a right to access
the Company’s IP over time, licence revenue is recognized over
the licence period.
• For those contracts where the licence obligation is determined
not to be distinct from other performance obligations, the licence
revenue is allocated to the associated performance obligations
and recognized upon achievement of performance applicable to
those obligations.
The Company is currently allocating the majority of its licence
revenue along with the associated performance obligations and
recognizing it upon achievement of performance applicable to
those obligations.
Revenue associated with solution definition and implementation
services is recognized either at a point in time or over time
depending on the terms of the contract and the performance
obligations therein. Most prevalent are contracts where the
revenue is recognized over a period of time. The Company has an
enforceable right to payment for service work done and revenue is
recognized over time using an estimate of the proportion of costs
incurred for work performed to date, relative to the total estimated
cost of completing the performance obligations of the contract.
Hosting, support and maintenance revenue is recognized according
to the delivery of the performance obligations in the contract and
the stand-alone selling price allocated to the obligations. These
services may be provided through either fixed-price, deliverable-
based contracts or fee-for-service contracts. Hosting contracts
generally result in linear monthly revenue recognition over the term
of the contract. Service revenue from fixed-price contracts to
provide services is recognized by reference to the stage of
completion as defined in the contract when the outcome of the
contract can be estimated reliably. Service revenue from time and
material contracts is recognized at the contractual rates as labour
hours are delivered and direct expenses are incurred.
Amounts received from customers in advance of the satisfaction of
our performance obligations are recorded as “contract liabilities” on
our consolidated statements of financial position. Amounts in
“contract liabilities” are recognized into revenue either over the
service period or when performance obligations are achieved. Costs
the Company incurs related to the fulfilment of a contract, but prior
to reaching a performance milestone, are recorded as a “contract
asset” on the consolidated statements of financial position. Once
the milestone is achieved, these costs are recorded in the
consolidated statements of comprehensive income.
76
2023 ISC® Annual Report | Notes to the Consolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Share-based compensation plans
• Option term: the maximum duration before expiry;
The Company has established share-based compensation plans to
provide directors and management of the Company with the
opportunity to participate in the long-term success of ISC and
promote a greater alignment of interests between its directors,
management and shareholders.
A long-term incentive plan utilizing performance share units
(“PSUs”) and share appreciation rights (“SARs”) was approved by the
Board on May 15, 2020 and amended and restated effective
September 1, 2023, to include Restricted Share Units (“RSUs”). No
RSUs have been granted as at December 31, 2023.
All share-based compensation expenses are recognized in wages
and salaries in the consolidated statements of comprehensive
income. For each plan, the Company recognizes compensation
expense proportionately over the vesting period. The cumulative
carrying value of all active and recognized stock options is reflected
in the equity settled employee benefits reserve in shareholders’
equity in the consolidated statements of financial position. The fair
value of units recognized in all other plans are reflected as
obligations in the consolidated statements of financial position in
other liabilities and/or accounts payable and accrued liabilities.
For PSUs and deferred share units (“DSUs”), compensation expense
consists of the difference between the fair value of the units
recognized at the start and end of the reporting period plus the
value of any units redeemed in the period. The fair value of the
PSUs and DSUs is based on the market value of the Company’s
Class A Shares on the TSX. Any change in estimate is recognized as
an increase or decrease to the liability and a corresponding charge
or credit to expense at the end of the reporting period, as
applicable. PSUs and DSUs earn dividend equivalent units (“DEUs”)
in the form of additional PSUs and DSUs, as applicable, at the same
rate as dividends on Class A Shares.
For SARs, the Black-Scholes methodology is used to value each SAR
grant when awarded. The inputs used in this valuation are
described below. At the end of each reporting period, the market
value of the SARs is equivalent to the market value of the
Company’s Class A Shares in excess of the SARs’ grant value (the “in
the money” portion) multiplied by the cumulative number of SAR
units active and recognized that are in the money at the reporting
date. Compensation expense consists of the difference between
the fair value of the units recognized at the start and end of the
reporting period plus the value of any units redeemed in the period.
Any change in estimate is recognized as an increase or decrease to
the liability and a corresponding charge or credit to expense at the
end of the reporting period, as applicable.
For the stock option plan, the Black-Scholes methodology is used to
value each option when awarded. The Company has used the
following variables as inputs in the Black-Scholes methodology for
the valuation of the SARs and the stock options. The inputs are
subject to review as applicable:
• Risk-free rate: estimated based on 10-year Canada bond rate;
• Dividend yield: based on ISC’s three-year average annual yield
rate; and
• Equity volatility: based on ISC’s three-year standard deviation of
Total Shareholder Return.
More details on each of the share-based compensation plans can
be found in Note 14.
Business acquisitions
Business acquisitions are accounted for using the acquisition
method. The consideration transferred in a business combination is
measured at fair value, which is calculated at the date of acquisition
as the sum of the fair values of the assets transferred by the
Company and the liabilities incurred by the Company to the former
owners of the acquiree in exchange for the control of the acquiree.
Acquisition costs are recognized in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired and the
liabilities assumed are recognized at their fair values, except the
deferred tax assets and liabilities, which are recognized and
measured in accordance with IAS 12 — Income Taxes.
Goodwill is measured as the excess of the sum of the consideration
transferred, the amount of any non-controlling interests in the
acquiree and the fair value of the acquirer’s previously held equity
interest in the acquiree, if applicable, over the net of the identifiable
assets acquired and the liabilities assumed at the date of acquisition.
When the consideration transferred by the Company in a business
combination includes assets or liabilities resulting from a contingent
consideration arrangement, the contingent consideration is
measured at its acquisition date fair value and included as part of
the consideration transferred in a business combination. Changes in
the fair value of the contingent consideration that qualify as
measurement period adjustments are adjusted retrospectively, with
corresponding adjustments against goodwill. Measurement period
adjustments are adjustments that arise from additional information
obtained during the “measurement period” (which cannot exceed
one year from the acquisition date) about facts and circumstances
that existed at the acquisition date.
The subsequent accounting for changes in fair value of the
contingent consideration that do not qualify as a measurement
period adjustment depends on how the contingent consideration is
classified. Contingent consideration classified as equity is not
measured at subsequent reporting dates and its subsequent
settlement is accounted for within equity. Contingent consideration
that is classified as an asset or a liability is remeasured at
subsequent reporting dates in accordance with IFRS 9 — Financial
Instruments, or IAS 37 — Provisions, Contingent Liabilities and
Contingent Assets, as appropriate, with the corresponding gain or
loss recognized in net earnings or loss.
77
2023 ISC® Annual Report | Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements | 2023 ISC® Annual ReportFor the Fourth Quarter and Year Ended December 31, 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Business acquisitions versus asset acquisitions
Intangible assets
Acquired businesses are assessed by management and where the
acquired operations do not consist of inputs and substantive
processes with the ability to create outputs, the definition of a
business is not met and in such cases the acquisition is treated as an
asset acquisition.
Intangible assets consist of acquired and internally developed
internal-use software and business solutions. They also include
externally acquired contracts, customer and partner relationships,
brand, non-competes, other intangible assets, and assets
under development.
When there is contingent consideration in an asset acquisition an
accounting policy choice exists whereby an entity may recognize a
liability for the expected variable payments at the time control of
the underlying asset is obtained or they may only recognize such a
liability as the related activity that gives rise to the variability occurs.
The Company has opted to recognize the liability only when the
related activity that gives rise to the variability occurs.
Property, plant and equipment
Property, plant and equipment are recorded at cost less
accumulated depreciation and any provisions for impairment. Cost
includes expenditures that are directly attributable to the
acquisition of the asset. The cost of self-developed assets includes
materials, services, direct labour and directly attributable overhead.
Interest costs associated with major capital and development
projects are capitalized during the development period.
Depreciation of assets under development will commence once
they are operational and available for use.
The costs of maintenance, repairs, renewals or replacements that
do not extend the productive life of an asset are charged to
operations when incurred. The costs of replacements and
improvements that extend the productive life are capitalized.
The cost of replacing part of an item of property, plant and
equipment is recognized in the carrying amount of the item if it is
probable that the future economic benefits embodied within the
part will flow to the Company and its cost can be measured reliably.
The carrying amount of the replaced part is derecognized.
Depreciation is recorded on property, plant and equipment on the
straight-line basis, which is the cost of the asset less its residual
value over the estimated productive life of each asset. The useful
life of each asset is as follows:
Leasehold improvements
Shorter of lease term or useful life
Office furniture
Office equipment
Hardware
2–10 years
2–10 years
3–4 years
The estimated useful life and depreciation methods are reviewed at
the end of each annual reporting period, with the effect of any
changes in estimate being accounted for on a prospective basis.
Gains or losses arising from the disposition or retirement of an item
of property, plant and equipment are measured at the difference
between the net disposal proceeds and the carrying amount of the
asset and are recognized in the consolidated statements of
comprehensive income.
Intangible assets acquired
Internal-use software and business solutions acquired are carried at
cost less accumulated amortization and any accumulated
impairment losses. Acquired contracts as well as internal-use
software, business solutions, customer and partner relationships,
brand, non-competes and other intangible assets acquired through
business combinations are initially recorded at their fair values
based on the present value of expected future cash flows, which
involves estimates about future cash flows and discount rates.
Internally generated intangible assets
Research expenditures are expensed while expenditures for
internal-use software developed internally and business solutions
developed internally and marketed externally are capitalized only
when they meet the recognition criteria for internally generated
intangible assets as provided under IFRS. An internally generated
intangible asset arising from development is recognized if and only
if all of the following have been demonstrated:
• the technical feasibility of completing the intangible asset so that
it will be available for use or sale;
• the intention to complete the intangible asset and use or sell it;
• the ability to use or sell the intangible asset;
• how the intangible asset will generate probable future
economic benefits;
• the availability of adequate technical, financial and other
resources to complete the development and to use or sell the
intangible asset; and
• the ability to reliably measure the expenditure attributable to the
intangible asset during its development.
The amount initially recognized for an internally generated
intangible asset is the sum of the expenditures incurred from the
date when the intangible asset first meets the recognition criteria. If
no internally generated intangible asset can be recognized,
development expenditures are charged to operations in the period
in which they are incurred. Subsequent to initial recognition, an
internally generated intangible asset is reported at cost less
accumulated amortization and accumulated impairment losses, on
the same basis as an intangible asset acquired separately.
Amortization of intangible assets
Amortization is recorded on intangible assets using the straight-line
method over the corresponding estimated useful life of the
applicable assets. The estimated useful life and amortization
methods are reviewed at the end of each annual reporting period,
78
2023 ISC® Annual Report | Notes to the Consolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS with the effect of any changes in estimate being accounted for
on a prospective basis. Gains or losses arising from the
derecognition of an intangible asset are measured as the difference
between the net disposal proceeds and the carrying amount of the
asset and are recognized in the consolidated statements of
comprehensive income.
Internal-use software
Business solutions
Contracts
Customer and partner relationships
Brand, non-competes and other
Assets under development
3–15 years
3–7 years
Term of contract
5–15 years
4–15 years
N/A (not ready for use)
Impairment of tangible and intangible assets
At each statement of financial position date, the Company reviews
the carrying amounts of its tangible and intangible assets to
determine whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine
the extent of the impairment loss (if any). Where it is not possible to
estimate the recoverable amount of an individual asset, the
Company estimates the recoverable amount of the cash generating
unit (“CGU”) to which the asset belongs. Where a reasonable and
consistent basis of allocation can be identified, corporate assets are
also allocated to individual CGUs; otherwise, they are allocated to
the smallest group of CGUs for which a reasonable and consistent
allocation basis can be identified. Intangible assets not yet available
for use are tested for impairment annually in December and
whenever there is an indication that the asset may be impaired.
The recoverable amount is the higher of fair value less costs to sell
and value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using a discount rate
that reflects current market assessments of the time value of
money and the risks specific to the asset for which the estimates of
future cash flows have not been adjusted. If the recoverable
amount of an asset (or CGU) is estimated to be less than its carrying
amount, the carrying amount of the asset (or CGU) is reduced to its
recoverable amount. An impairment loss is recognized immediately
in comprehensive income.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (or CGU) is increased to the revised estimate of
its recoverable amount, insofar as the increased carrying amount
does not exceed the carrying amount that would have been
determined had no impairment loss been recognized for the asset
(or CGU) in prior years. A reversal of an impairment loss is
recognized immediately in comprehensive income.
Goodwill
Goodwill arising on the acquisition of a business represents the
excess of the purchase price over the net fair value of the
identifiable assets, liabilities and contingent liabilities of the acquired
business recognized at the date of acquisition. Goodwill is initially
recognized as an asset at cost and is subsequently measured at cost
less any accumulated impairment losses.
Impairment of goodwill
For the purpose of impairment testing, goodwill is allocated to the
CGUs expected to benefit from the synergies of the combination.
CGUs are tested for impairment annually or more frequently if
events indicate that the units may be impaired. The Company’s
operating segments that correspond to the CGUs for impairment
testing are disclosed in Note 9.
When the recoverable amount of the CGU is less than the carrying
amount of the CGU, the impairment loss is allocated first to reduce
the carrying amount of any goodwill allocated to the unit and then
to the other assets of the CGU on a pro-rata basis. An impairment
loss recognized for goodwill is not reversed in a subsequent year.
The Company performs its annual review of goodwill in December
each year.
Financial instruments
Financial assets
The Company’s financial assets are classified as either financial
assets at fair value through profit or loss (“FVTPL”), fair value
through other comprehensive income (“FVTOCI”) or amortized cost
(“AC”). The Company determines the classification of financial assets
at initial recognition.
(i) Financial assets at FVTPL
Financial assets carried at FVTPL are initially recorded at fair value
and transaction costs are expensed in profit or loss. Realized and
unrealized gains and losses arising from changes in the fair value of
the financial assets held at FVTPL are included in profit or loss in the
period in which they arise. The Company does not have any assets
classified as FVTPL.
(ii) Financial assets at FVTOCI – Equity investments
Financial assets carried at FVTOCI are initially recorded at fair value
plus transaction costs with all subsequent changes in fair value
recognized in other comprehensive income (loss). For investments
in equity instruments that are not held for trading, the Company
can make an irrevocable election (on an instrument-by-instrument
basis) at initial recognition to classify them as FVTOCI. On the
disposal of the investment, the cumulative change in fair value
remains in other comprehensive income (loss) and is not recycled
to profit or loss.
(iii) Financial assets at AC
Financial assets are classified at AC if the objective of the business
model is to hold the financial asset for the collection of contractual
cash flows and the assets’ contractual cash flows solely comprise
payments of principal and interest. The Company’s cash and trade
and other receivables are recorded at AC as they meet the
required criteria.
79
2023 ISC® Annual Report | Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements | 2023 ISC® Annual ReportFor the Fourth Quarter and Year Ended December 31, 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Financial liabilities
The Company’s financial liabilities are initially recorded at fair value, net of transaction costs and are subsequently measured at AC, using the
effective interest method, with interest expense recognized on an effective yield basis.
The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expenses over the
corresponding period. The effective interest rate is the rate that exactly discounts estimated future cash payments over the expected life of
the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
The Company’s financial liabilities include accounts payable and accrued liabilities, excluding share-based accrued liabilities, vendor
concession liability and long-term debt, which are classified at AC.
Below is a summary showing the classification and measurement bases of our financial instruments.
Financial Instrument
IFRS 9 — Financial Instruments
Classification
Measurement
Assets
Cash
Trade and other receivables
Liabilities
AC
AC
Amortized cost using effective interest rate method
Amortized cost using effective interest rate method
Accounts payable and accrued liabilities excluding
AC
Amortized cost using effective interest rate method
share-based accrued liabilities
Vendor concession liability
Long-term debt
Impairment of financial assets
AC
AC
Amortized cost using effective interest rate method
Amortized cost using effective interest rate method
The Company recognizes lifetime expected credit losses (“ECL”) for trade and other receivables. The ECL on these financial assets are
estimated based on the Company’s historical credit loss experience, adjusted for factors that are specific to the debtors, general economic
conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting date, including time value
of money where appropriate. The Company’s credit losses are historically low as most customers with credit are governments, banking
institutions and legal firms with strong credit.
For all other financial instruments, the Company recognizes lifetime ECL when there has been a significant increase in credit risk since initial
recognition. However, if the credit risk on the financial instrument has not increased significantly since initial recognition, the Company
measures the loss allowance for that financial instrument at an amount equal to 12-month ECL.
Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of a financial
instrument. In contrast, 12-month ECL represents the portion of lifetime ECL that is expected to result from default events on a financial
instrument that are possible within 12 months after the reporting date.
Leases
The Company assesses whether a contract is or contains a lease at inception of the contract. The Company recognizes a right-of-use asset
and a corresponding lease obligation for all lease arrangements in which it is the lessee, except for short-term leases (defined as leases
with a lease term of 12 months or less) and leases of low-value assets (such as tablets and personal computers, small items of office furniture
and telephones). For these leases, the Company recognizes the lease payments as an operating expense on a straight-line basis over the
term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased
assets are consumed.
The lease obligation is initially measured at the present value of the lease payments that are not paid at the commencement date,
discounted using the interest rate implicit in the lease, or, if that rate cannot be readily determined, the Company uses its incremental
borrowing rate as the discount rate.
Lease payments included in the measurement of the lease obligation are comprised of the following:
• fixed payments, including in-substance fixed payments;
• variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
80
2023 ISC® Annual Report | Notes to the Consolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
• amounts expected to be payable under a residual value
guarantee;
the useful life of the underlying asset. The depreciation starts at the
commencement date of the lease.
• the exercise price under a purchase option that the Company is
reasonably certain to exercise and lease payments in an optional
renewal period if the Company is reasonably certain not to
terminate early; and
• payments of penalties for terminating the lease if the lease term
reflects the exercise of an option to terminate the lease.
The lease obligation is presented in the consolidated statements of
financial position with current and long-term classifications.
The lease obligation is subsequently measured by increasing the
carrying amount to reflect the interest on the lease obligation (using
the effective interest method) and by reducing the carrying amount
to reflect the lease payments made.
The Company remeasures the lease obligation (and makes
a corresponding adjustment to the related right-of-use
asset) whenever:
• the lease term has changed, or there is a significant event or
change in circumstances resulting in a change in the assessment
of exercise of a purchase option, in which case the lease
obligation is remeasured by discounting the revised lease
payments using a revised discount rate;
• the lease payments change due to changes in an index or rate
or a change in expected payment under a guaranteed residual
value, in which cases the lease obligation is remeasured by
discounting the revised lease payment using an unchanged
discount rate (unless the lease payments change is due to a
change in a floating interest rate, in which case a revised discount
rate is used); and
• a lease contract is modified, and the lease modification is not
accounted for as a separate lease, in which case the lease
obligation is remeasured based on the lease term of the modified
lease by discounting the revised lease payments using a revised
discount rate at the effective date of the modification.
Right-of-use assets comprise the initial measurement of the
corresponding lease obligation and lease payments made at or
before the commencement day, less any lease incentives received
and any initial direct costs. They are subsequently measured at cost
less accumulated depreciation and impairment losses.
Whenever the Company incurs an obligation for costs to dismantle
and remove a leased asset, restore the site on which it is located, or
restore the underlying asset to the condition required by the terms
and conditions of the lease, a provision is recognized and measured
under IAS 37. To the extent that the costs relate to a right-of-use
asset, the costs are included in the related right-of-use asset, unless
those costs are incurred to produce inventories.
Right-of-use assets are depreciated over the shorter period of the
lease term and the useful life of the right-of-use asset. If a lease
transfers ownership of the underlying asset or the cost of the
right-of-use asset reflects that the Company expects to exercise a
purchase option, the related right-of-use asset is depreciated over
The right-of-use assets are presented as a separate line in the
consolidated statements of financial position.
The Company applies IAS 36 to determine whether a right-of-use
asset is impaired and accounts for any identified impairment loss as
described in the “Property, Plant and Equipment” policy.
Variable rents that do not depend on an index or rate are not
included in the measurement of the lease obligation and the
right-of-use asset. The related payments are recognized as an
expense in the period in which the event or condition that triggers
those payments occurs and are included in the line “occupancy
costs” in the consolidated statements of comprehensive income.
As a practical expedient, IFRS 16 — Leases permits a lessee not to
separate non-lease components and instead, account for any lease
and associated non-lease components as a single arrangement. The
Company has not used this practical expedient. For contracts that
contain a lease component and one or more additional lease or
non-lease components, the Company allocates the consideration in
the contract to each lease component on the basis of the relative
stand-alone price of the lease component and the aggregate
stand-alone price of the non-lease components at amortized cost
using the effective interest method.
Foreign currency
The individual financial statements of each subsidiary entity are
presented in the currency of the primary economic environment in
which the entity operates (its functional currency). For the purpose
of the consolidated financial statements, the results and financial
position of each subsidiary entity are presented in Canadian dollars,
which is the functional currency of the parent company and the
presentation currency for the financial statements.
In preparing the individual subsidiaries’ financial statements,
transactions in currencies other than the entity’s functional
currency (foreign currencies) are recognized at the rates of
exchange prevailing at the dates of the transactions. At the end of
each reporting period, monetary items denominated in foreign
currencies are translated at the rates prevailing at that date.
Exchange differences are recognized in earnings in the period in
which they arise. Non-monetary items carried at fair value that are
denominated in foreign currencies are translated at the rates
prevailing at the date when the fair value was determined.
Non-monetary items that are measured in terms of historical cost in
a foreign currency are not translated.
For the purpose of presenting consolidated financial statements,
the assets and liabilities of the Company’s foreign operations are
expressed in Canadian dollars using exchange rates prevailing at the
end of the reporting period. Income and expense items are
translated at the average exchange rates for the period. Foreign
currency gains and losses are recognized in other comprehensive
81
2023 ISC® Annual Report | Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements | 2023 ISC® Annual ReportFor the Fourth Quarter and Year Ended December 31, 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS income. The relevant amount in the cumulative foreign currency translation adjustment is reclassified into earnings upon disposition or
partial disposition of a foreign operation and attributed to non-controlling interests as appropriate.
Recent accounting pronouncements
The IASB and IFRS Interpretations Committee (“IFRIC”) issued the following new standards and amendments to standards and
interpretations, which become effective for future periods.
Proposed Standard Description
Amendments
to IAS 1 —
Classification of
Liabilities as Current
or Non-current
The amendments to IAS 1 affect only the presentation of liabilities as current or
non-current in the statement of financial position and not the amount or timing of
recognition of any asset, liability, income or expenses, or the information disclosed
about those items.
These amendments specify that covenants to be complied with after the reporting
date do not affect the classification of debt as current or non-current at the reporting
date. Instead, the amendments require a company to disclose information about these
covenants in the notes to the financial statements.
The amendments are applied retrospectively for annual periods beginning on or after
January 1, 2024, with early application permitted. This amendment is currently being
assessed by the Company to determine the impact.
Effective Date
January 1, 2024
Amendments to
IFRS 16 — Lease
liability in a Sale and
Leaseback
The amendment clarifies how a seller-lessee subsequently measures sale and leaseback
transactions that satisfy the requirements in IFRS 15 — Revenue from Contracts with
Customers to be accounted for as a sale.
The amendment is effective for annual periods beginning on or after January 1, 2024.
The Company has assessed the impact of the adoption of this amendment and it
is not expected to have a material impact on the Company’s consolidated financial
statements.
January 1, 2024
Amendments to
IAS 7 and IFRS 7
— Supplier Finance
Arrangements
The amendments add disclosure requirements and ‘signposts’ within existing disclosure
requirements that ask entities to provide qualitative and quantitative information about
supplier finance arrangements.
The amendments are effective for annual periods beginning on or after January 1,
2024. The Company has assessed the impact of the adoption of the amendments
and they are not expected to have a material impact on the Company’s consolidated
financial statements.
January 1, 2024
4 Trade and Other Receivables
The components of trade and other receivables are as follows:
(thousands of CAD)
Trade receivables
GST/HST/VAT receivables
Other
Total trade and other receivables
5 Contract Assets
The components of contract assets are as follows:
(thousands of CAD)
Unbilled revenue
Contract fulfilment costs
Total contract assets
82
$
December 31,
2023
14,607
296
770
15,673
$
$
December 31,
2023
2,104
545
2,649
$
$
December 31,
2022
14,049
192
692
14,933
$
$
December 31,
2022
589
396
985
$
2023 ISC® Annual Report | Notes to the Consolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Unbilled revenue represents the aggregate asset value on the consolidated statements of financial position of all instances where revenue
has been recognized but not yet invoiced to the customer. Contract assets in this category are reclassified to trade receivables when the
customer is invoiced.
Contract fulfilment costs are costs the Company incurs related to the fulfilment of performance obligations in contracts where revenue is
recognized over time, but prior to reaching a performance milestone. Once the milestone is achieved, these costs, along with the associated
revenue, will be recognized in the consolidated statements of comprehensive income. Contract fulfilment costs also include payments for
recovery services, which are reimbursed to the Company by customers that have contracted the services. Once this reimbursement occurs,
this revenue is recognized in the consolidated statements of comprehensive income on a net basis with these costs.
The Company does not have any contract acquisition costs at the end of the reporting period and did not recognize any amortization of
contract acquisition costs during the year (2022 — nil).
There were no impairment losses recognized on any contract asset during the reporting period (2022 — nil).
6 Property, Plant and Equipment
(thousands of CAD)
Cost
Balance at January 1, 2022
Acquired assets1
Additions
Disposals
Transfers
Foreign exchange adjustments
Balance at December 31, 2022
Additions
Disposals
Transfers
Foreign exchange adjustments
Balance at December 31, 2023
Accumulated depreciation
Balance at January 1, 2022
Depreciation
Disposals
Foreign exchange adjustments
Balance at December 31, 2022
Depreciation
Disposals
Foreign exchange adjustments
Balance at December 31, 2023
Carrying value
At December 31, 2022
At December 31, 2023
1 Acquired assets – see Note 27.
Leasehold
Improvements
Office
Furniture
Office
Equipment
Hardware
Assets Under
Development
Total
$ 7,971
119
–
(51)
73
–
8,112
3
–
13
–
$ 8,128
$ 7,057
266
(51)
–
7,272
254
–
–
$ 7,526
$ 3,102
73
9
(285)
34
–
2,933
–
(391)
–
–
$ 2,542
$ 2,971
45
(285)
1
2,732
38
(391)
–
$ 2,379
$
$
840
602
$
$
201
163
$
$
$
$
$
$
161
–
–
(5)
–
–
156
–
(1)
–
–
155
154
3
(5)
–
152
2
(1)
–
153
$ 2,808
401
468
(12)
14
8
3,687
317
(1,022)
9
2
$ 2,993
$ 2,533
394
(12)
4
2,919
417
(1,022)
2
$ 2,316
4
2
$
$
768
677
$
$
$
$
$
$
24
–
97
–
(121)
–
–
679
–
(22)
–
657
–
–
–
–
–
–
–
–
–
–
657
$ 14,066
593
574
(353)
–
8
14,888
999
(1,414)
–
2
$ 14,475
$ 12,715
708
(353)
5
13,075
711
(1,414)
2
$ 12,374
$ 1,813
$ 2,101
83
2023 ISC® Annual Report | Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements | 2023 ISC® Annual ReportFor the Fourth Quarter and Year Ended December 31, 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
7 Right-of-use Assets
(thousands of CAD)
Cost
Balance at January 1, 2022
Additions and modifications
Additions – acquisitions2
Reclass to accumulated depreciation
Foreign exchange adjustments
Balance at December 31, 2022
Additions and modifications
Disposals
Foreign exchange adjustments
Balance at December 31, 2023
Accumulated depreciation
Balance at January 1, 2022
Depreciation
Foreign exchange adjustments
Reclass from cost
Balance at December 31, 2022
Depreciation
Disposals
Foreign exchange adjustments
Balance at December 31, 2023
Carrying value
At December 31, 2022
At December 31, 2023
1 The Company’s right-of-use assets consist primarily of property leases associated with the lease of office space.
2 Acquired assets – see Note 27.
Property and Equipment1
$
$
$
$
$
$
$
$
18,954
606
1,283
(2,721)
(32)
18,090
3,430
(311)
12
21,221
11,093
2,212
(47)
(2,721)
10,537
2,311
(311)
2
12,539
7,553
8,682
84
2023 ISC® Annual Report | Notes to the Consolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
8 Intangible Assets
Internal Use
Software –
Internal Use
Software –
Internally
Acquired Developed
Business
Solutions –
Acquired
Business
Solutions – Brand, Non-
competes,
Internally
Developed
Contracts,
Customer
and Partner
Assets
Under
Other Relationships Development
Total
–
–
–
–
22
2,222 $ 96,812 $
–
–
(43)
–
–
–
–
(47)
–
–
$ 26,079 $ 78,771 $ 2,011 $
5,328
–
–
–
–
31,466
–
–
–
29
6,029 $
–
–
–
658
32
6,719 $
–
–
–
373
19
1,398 $ 65,317 $
1,000
–
(176)
–
–
(thousands of CAD)
Cost
Balance at January 1, 2022
Acquired assets1
Additions
Disposals
Transfers
Foreign exchange adjustments
Balance at December 31, 2022 $ 31,407 $ 78,724 $ 2,033 $
–
Acquired assets
–
Additions
–
Disposals
1,585
Transfers
Foreign exchange adjustments
–
Balance at December 31, 2023 $ 31,364 $ 80,309 $ 2,047 $ 7,111 $ 2,222 $ 374,455 $
Accumulated depreciation
Balance at January 1, 2022
Amortization
Disposals
Foreign exchange adjustments
Balance at December 31, 2022 $ 22,069 $ 77,689 $ 1,751 $
Amortization
Disposals
Foreign exchange adjustments
Balance at December 31, 2023 $ 25,068 $ 78,358 $ 2,025 $ 5,249 $
Carrying value
At December 31, 2022
At December 31, 2023
282 $
1,518 $ 70,591 $
22 $ 1,862 $ 1,240 $ 335,656 $
663 $ 18,408 $
217
(176)
–
3,983 $
561
–
35
4,579 $
659
–
11
704 $ 26,221 $
278
–
–
277,634
–
–
–
9
$
9,338 $ 1,035 $
$ 6,296 $ 1,951 $
$ 19,498 $ 77,323 $ 1,471 $
12,574
–
4
3,042
(43)
–
7,804
–
9
2,571
–
–
982 $ 38,799 $
–
–
–
–
14
413
(47)
–
249
–
31
669
–
–
262
–
12
–
–
–
–
–
2,140 $
–
1,887
–
(658)
52
2,808 $ 182,413
37,794
1,887
(223)
–
135
4,089 $ 222,006
277,634
2,588
(43)
–
66
4,743 $ 502,251
–
2,588
–
(1,958)
24
– $ 121,346
11,815
–
(223)
–
75
–
– $ 133,013
17,484
–
–
(43)
27
–
– $ 150,481
4,089 $ 88,993
4,743 $ 351,770
1 Acquired assets – see Note 27
During the year, ISC entered into the Amended and Restated MSA extending the term of the MSA from May 2033 to July 2053. The
consideration to be paid includes an upfront cash payment of $150 million (“Upfront Payment”) which was paid during the year, five annual
cash payments of $30 million per year commencing July 2024 (the “Subsequent Payments”) and annual contingent payments potentially
payable after 2033 if certain volume growth criteria are met. In addition, annual cost contribution amounts of $0.5 million over the 30-year
term will continue. ISC has capitalized the extension of the right to manage and operate the Saskatchewan Registries in accordance with
IAS 38. The liability for the contingent payments will only be recognized in the consolidated statement of financial position and consolidated
statement of comprehensive income as the related activity that gives rise to the variability occurs. Directly attributable costs of $3.4 million
have also been capitalized as part of the purchase price. The payments and directly attributable costs have been present valued in
accordance with IFRS 9 — Financial Instruments and included in acquired assets.
85
2023 ISC® Annual Report | Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements | 2023 ISC® Annual ReportFor the Fourth Quarter and Year Ended December 31, 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
9 Goodwill
The components of goodwill are as follows:
(thousands of CAD)
Balance, beginning of year
Additions1
Foreign exchange adjustment
Balance, end of year
1 Acquired assets – see Note 27.
December 31,
2023
$ 101,240
–
26
$ 101,266
$
December 31,
2022
77,134
24,063
43
$ 101,240
For the purposes of the annual impairment testing, goodwill
is allocated to the following CGUs, which are the groups of
units expected to benefit from the synergies of the
business combinations:
(thousands of CAD)
Registry Operations
Services
Technology Solutions
Balance, end of year
$
December 31,
2023
21,098
71,537
8,631
$ 101,266
$
December 31,
2022
21,098
71,537
8,605
$ 101,240
The Company performs a goodwill impairment test annually on
December 31 and whenever there is an indication of impairment.
No impairment of goodwill was identified as a result of the
Company’s most recent annual impairment test.
The Company uses the traditional cash flow approach for
determining value in use for the Registry Operations segment, while
value in use for each of the Services and Technology Solutions
segments was determined using the expected cash flow approach.
The Company uses the discounted cash flow method to determine
the recoverable amount, which required management to make
estimates and assumptions related to revenue forecasts, related
party costs, direct employee costs, corporate cost allocations,
perpetual growth rates and discount rates. The estimates and
assumptions are highly sensitive to changes in customer demand
and changes in the assumptions could significantly impact the
recoverable amount, the amount of any goodwill impairment
charge, or both. In all cases, the operating and investing cash flows
of the segments used the Company’s most recent multi-year plan,
with assumptions based on experience and future expectations for
business performance.
Registry Operations
Key assumptions for this segment include the performance of the
Saskatchewan economy, revenue growth, related party costs,
corporate cost allocations required to support infrastructure, and
future technological investment in and related to this infrastructure
as well as the renewal of the contract with the Government of
Ontario in the Ontario Property Tax Assessment Services division. In
2023, annual impairment testing for this segment used a pre-tax
discount rate of 14.4 per cent (2022 — 15.1 per cent) and a perpetual
growth rate of 2.0 per cent (2022 — 2.0 per cent). Given the strong
cash flow in Registry Operations relative to the size of goodwill, the
risk of impairment is remote and as a result the traditional cash flow
approach was used for this segment.
Services
Key assumptions for this segment include the performance of
the Canadian economy, revenue growth, including attracting new
customers and adding incremental value to existing customers,
related party costs, corporate cost allocations required to support
infrastructure and future technological investment in and related
to this infrastructure. The most material estimates and assumptions
include revenue forecasts, perpetual growth rates and discount
rates. Performance during the multi-year planning period is
consistent with past performance, which experienced growth in
operating cash flow in excess of the perpetual growth rate of
2.75 per cent (2022 — 2.75 per cent) used in the annual test. In
2023, annual impairment testing for this segment used a pre-tax
discount rate of 17.8 per cent (2022 — 18.5 per cent).
Technology Solutions
Key assumptions for this segment, which has operations in both
Ireland and Canada, include revenue growth, the ability to attract
new customers, actual contract delivery performance compared to
the level of performance anticipated when the contract was
negotiated, the level of support required by related party
customers, direct employee costs and corporate cost allocations
required to support infrastructure, as well as future technological
investment in and related to intellectual property. The estimates
and assumptions with the highest degree of subjectivity are
revenue forecasts, perpetual growth rates and discount rates. This
segment was negatively impacted by COVID-19 as governments
deferred registry projects and redirected attention to the
preservation of the health and safety of their populations. During
the latter part of 2022, there was renewed procurement activity,
which has generated an active pipeline of opportunities as well as
new solution definition and implementation contracts that are
currently in the process of being delivered. This renewed
procurement activity and new customer contracts to be delivered
during the multi-year planning period has resulted in segment
expectations returning to those consistent with pre-COVID-19
performance/trends, which experienced growth in operating
cash flow in excess of the perpetual growth rate of 2.0 per cent
(2022 — 2.0 per cent) used in the annual impairment test. In 2023,
annual impairment testing for this segment used a pre-tax discount
rate of 17.1 per cent (2022 — 17.1 per cent) in its Canada-based
operations and 17.1 per cent (2022 — 17.1 per cent) in its Ireland-
based operations.
86
2023 ISC® Annual Report | Notes to the Consolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
10 Accounts Payable and Accrued Liabilities
The components of accounts payable and accrued liabilities are as follows:
(thousands of CAD)
Trade payables
Accrued liabilities
Customer deposits
Dividend payable
Share-based accrued liabilities
Consideration due to vendor
Total accounts payable and accrued liabilities
11 Contract Liabilities
The components of contract liabilities are as follows:
(thousands of CAD)
Amounts received in advance of Registry Operations’ Saskatchewan Registries
division maintenance and support contracts (i)
Amounts received in advance of Technology Solutions support
and delivery contracts (ii)
Total contract liabilities
December 31,
December 31,
2023
6,842
12,941
4,400
4,141
7,790
–
36,114
$
$
2022
7,444
9,765
4,221
4,071
8,149
226
33,876
$
$
December 31,
December 31,
2023
232
2,532
2,764
$
$
2022
320
2,400
2,720
$
$
(i) Revenue that relates to Registry Operations’ Saskatchewan Registries division maintenance and support contracts is recognized over time, while all other Saskatchewan
Registries division revenue is recognized at a point in time. A contract liability is recognized for payments received from end-use customers in advance of services being
provided and is recognized into revenue either at the point in time the service is rendered or over the service period.
(ii) Revenue and other income related to Technology Solutions contracts is recognized over time as the performance obligations in the contract are achieved. These
obligations may be based on a time period or on performance against commitments identified in the contract. A contract liability is recognized for payments received from
customers in advance and is recognized into revenue either over the service period or when performance against contractual commitments is achieved.
Revenue recognized during the year that had been included in the contract liability balance at the beginning of the year is as follows:
(thousands of CAD)
Registry Operations’ Saskatchewan Registries division maintenance and support contracts $
Technology Solutions support and delivery contracts
Total revenue recognized that was included in the balance at the
beginning of the year
$
2023
320
962
1,282
2022
314
325
639
$
$
Year Ended December 31,
The Company has elected to apply the practical expedient as per IFRS 15 B16 and does not disclose the value of unsatisfied performance
obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which the Company recognizes revenue
at the amount to which it has the right to invoice for services performed.
87
2023 ISC® Annual Report | Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements | 2023 ISC® Annual ReportFor the Fourth Quarter and Year Ended December 31, 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
12 Lease Obligations
(thousands of CAD)
Balance, beginning of year
Additions
Additions – acquisitions1
Interest expense
Effect of modification to lease terms
Lease payments2
Foreign exchange adjustments
Balance, end of year
Year Ended December 31,
2023
8,807
3,430
–
400
–
(2,783)
10
9,864
$
$
2022
9,033
240
1,283
403
366
(2,540)
22
8,807
$
$
1 Acquired assets – see Note 27.
2 Lease payments net of interest expense represent the principal portion of lease payments reflected on the consolidated statements of cash flows.
The Company’s lease obligations consist primarily of property leases associated with the lease of office space. Expenses for short-term leases
and leases of low-dollar-value items are not material. All extension options have been considered in the measurement of lease obligations.
The following table presents the contractual undiscounted cash flows for lease obligations:
(thousands of CAD)
Year 1
Year 2
Year 3
Year 4
Year 5
Thereafter
Balance, end of year
Unearned interest
Balance, end of year
Reflected as:
Lease obligations – current portion
Lease obligations
Balance, end of year
13 Tax Provision
Year Ended December 31,
2023
3,293
2,044
1,757
1,641
1,530
1,036
11,301
(1,437)
9,864
2,809
7,055
9,864
$
$
$
$
$
2022
2,642
2,531
1,260
950
811
1,697
9,891
(1,084)
8,807
2,299
6,508
8,807
$
$
$
$
$
The Company is subject to federal and provincial income taxes at an estimated combined statutory rate of 27.0 per cent (2022 — 27.0 per cent).
Year Ended December 31,
2023
9,900
(155)
9,745
$
$
2022
12,360
(111)
12,249
$
$
(thousands of CAD)
Current tax expense
Deferred tax recovery
Income tax expense
88
2023 ISC® Annual Report | Notes to the Consolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Income tax expense varies from the amounts that would be computed by applying the combined statutory income tax rate to earnings
before taxes for the following reasons:
(thousands of CAD)
Income before tax
Combined statutory income tax rate
Expected income tax expense
Increase (decrease) in income tax resulting from:
Non-deductible expenses
Foreign income tax differential
Adjustment to prior years’ deferred tax assets and liabilities
Other
Income tax expense
Year Ended December 31,
2023
34,790
27.00%
9,393
223
19
(3)
113
9,745
$
$
2022
43,018
27.00%
11,615
162
488
(6)
(10)
12,249
$
$
Income tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities are as follows: :
(thousands of CAD)
Property, plant
and equipment
Right–of–use assets
Intangible assets
Goodwill
Non–capital losses
Lease obligations
Vendor concession liability
Share–based compensation
and other
Net deferred tax
assets (liabilities)
1 See Notes 8 and 16.
(thousands of CAD)
Property, plant
and equipment
Right–of–use assets
Intangible assets
Goodwill
Non–capital losses
Lease obligations
Share–based compensation
and other
Net deferred tax
assets (liabilities)
1 See Note 27.
Net Balance Recognized
in Profit
or Loss Movement Acquisitions1
January 1,
2023
Foreign
Exchange
Net Balance
December 31,
2023
Deferred
Tax Asset
Deferred
Tax Liability
$
196 $
(1,806)
10,526
(1,799)
703
2,131
–
$
68
(334)
(914)
(402)
635
313
1,170
$
$
–
–
1
–
5
–
–
$
–
–
11,015
–
–
–
(11,015)
264
(2,140)
20,628
(2,201)
1,343
2,444
(9,845)
$
177
(1,121)
29,807
–
1,338
1,394
(9,845)
87
(1,019)
(9,179)
(2,201)
5
1,050
–
2,805
(381)
(2)
–
2,422
2,422
–
$ 12,756 $
155 $
4 $
– $
12,915
$ 24,172
$ (11,257)
Net Balance
January 1,
2022
Recognized
in Profit
or Loss
Foreign
Exchange
Movement Acquisitions1
Net Balance
December 31,
2022
Deferred
Tax Asset
Deferred
Tax Liability
$
340 $
(1,880)
20,311
(1,376)
–
2,196
(55) $
365
39
(423)
608
(357)
2,866
(66)
–
(1)
1
–
16
2
5
$
(89) $
(290)
(9,825)
–
79
290
196
(1,806)
10,526
(1,799)
703
2,131
$
162
(1,419)
22,994
–
367
1,730
$
34
(387)
(12,468)
(1,799)
336
401
–
2,805
2,805
–
$ 22,457 $
111
$
23
$
(9,835) $
12,756
$ 26,639
$
(13,883)
89
2023 ISC® Annual Report | Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements | 2023 ISC® Annual ReportFor the Fourth Quarter and Year Ended December 31, 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In assessing the recovery of deferred tax assets, management considers whether it is probable that the deferred tax assets will be realized.
The recognition and measurement of the current and deferred tax assets and liabilities involves dealing with uncertainties in the application
of complex tax regulations and in the assessment of the recoverability of the deferred tax assets. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the periods in which the temporary differences are deductible.
Actual income taxes could vary from these estimates as a result of future events, including changes in income tax laws or the outcome of
tax reviews by tax authorities and related appeals. To the extent the outcome is different from the amounts initially recorded, such
differences, which could be significant, will impact the tax provision in the period in which the outcome is determined.
No deferred tax has been recognized in respect of temporary differences associated with investments in the Company’s subsidiaries where
the Company can control the timing and reversal of the temporary differences and it is probable that such differences will not reverse in the
foreseeable future.
At December 31, 2023, a deferred tax asset of $0.4 million (2022 — $0.4 million) has been recognized in respect of $3.3 million of tax losses
(2022 — $2.7 million) related to ERS. Management anticipates that ERS will earn sufficient future taxable income to utilize the tax losses,
which do not expire. A deferred tax asset of $0.8 million (2022 — $0.3 million) has been recognized at December 31, 2023, in respect of
$2.9 million of tax losses (2022 — $1.3 million) related to CRM. Management anticipates that CRM will earn sufficient future taxable income
to utilize the tax losses which do not commence expiry until 2042.
14 Share-Based Compensation Plans
The Company has established share-based compensation plans to provide directors and management of the Company with the
opportunity to participate in the long-term success of ISC and to promote a greater alignment of interests between its directors,
management and shareholders.
Share-based compensation expenses are recognized in wages and salaries on the consolidated statements of comprehensive income:
(thousands of CAD)
Performance share units
Share appreciation rights
Deferred share units
Stock options
Share-based compensation expense
Market price, beginning of year
Market price, end of year
Performance share units
Year Ended December 31,
2023
735
(689)
237
283
–
283
24.17
22.18
$
$
$
$
2022
913
200
377
1,490
(7)
1,483
25.29
24.17
$
$
$
$
Introduced in 2019, PSUs are granted with the objective of recognizing and rewarding management for performance and retention.
A PSU is a notional unit equivalent to a Class A Share granted by the Company to the participant, entitling such participant to receive the
PSU payment value, which is conditional on attaining specific PSU performance criteria.
PSU awards vest at the end of the specified vesting period – currently three years – if the performance conditions determined by the Board
in the grant agreement are met. PSUs earn dividend equivalent units in the form of additional PSUs at the same rate as dividends on Class A
Shares. The cash redemption value of the PSUs is equivalent to the market value of the Class A Shares when redemption takes place,
multiplied by a multiplier based on the grant agreement and the performance against the performance conditions as specified. The
maximum PSU payout multiplier is 150.0 per cent.
90
2023 ISC® Annual Report | Notes to the Consolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
On the settlement date, the Company delivers to each participant a cash payment equal to the redemption value of the PSU. A summary of
the status of the PSU plan and the changes within the years ended December 31, 2023 and 2022, is as follows:
(thousands of CAD, except number of units)
Balance at January 1, 2022
Units proportionally recognized in the
current period, from previous grants
March 24, 2022 grant
Dividend units
PSUs redeemed
PSUs forfeited
Balance at December 31, 2022
Balance at January 1, 2023
Units proportionally recognized in the
current period, from previous grants
August 14, 2023 grant
Dividend units
PSUs redeemed
PSUs forfeited
Balance at December 31, 2023
Total Units
Granted
101,261
Units
Recognized
73,080
–
21,978
3,330
(37,926)
(1,708)
86,935
20,541
7,306
3,330
(37,926)
(1,259)
65,072
86,935
65,072
–
28,648
3,384
(41,805)
(5,202)
71,960
14,517
9,523
3,384
(41,805)
(2,732)
47,959
Short-Term
Liability1
Long-Term
Liability2
Total
Liability3
$
1,801
$
198
$
1,999
$ 1,137
$
205
$
1,342
1 Included within accounts payable and accrued liabilities on the consolidated statements of financial position.
2 Included within other non-current liabilities on the consolidated statements of financial position.
3 The liability balances include the impact of estimated performance adjustments by individual grant year.
Fully Vested Units:
Balance at December 31, 2022
Balance at December 31, 2023
Share appreciation rights
Units Vested
40,928
24,121
Introduced in 2019, SARs are granted with the objective of recognizing and rewarding management for creating sustainable, long-term
shareholder value, as well as retention. A SAR is a right granted by the Company to a participant to receive a cash payment equal to any
appreciation in the Class A Shares in excess of the SAR price at the grant date during a specified period.
SAR awards vest and become exercisable at a rate of 25.0 per cent on each anniversary of the grant date beginning with the first
anniversary, unless an alternate vesting schedule is specified by the Board at the time of the award. SARs expire eight years after the
grant date.
The participant is able to exercise the SARs as they vest. The cash redemption value of the SARs is equivalent to the excess of the market
value of the Class A Shares at the exercise date over the SAR price in the grant agreement.
On the settlement date, the Company delivers to each participant a cash payment equal to the redemption value of the SARs.
91
2023 ISC® Annual Report | Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements | 2023 ISC® Annual ReportFor the Fourth Quarter and Year Ended December 31, 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
A summary of the status of the SAR plan and the changes within the years ended December 31, 2023 and 2022, is as follows:
(thousands of CAD, except number
of units and per unit prices)
Units
Balance at January 1, 2022
SARs proportionately recognized
667,193
Weighted
Average
Award
Price
FV Market
Price at
Reporting
Period
Units
Recognized
Short-Term
Liability1
Long-Term
Liability2
Total
Liability
$
16.61 $
24.17
461,394
in the year from grants awarded
in previous years
SARs granted March 24, 2022
SARs redeemed
SARs forfeited
Balance at December 31, 2022
$
–
88,410
$
(8,987) $
(21,708) $
$
724,908
– $
22.81 $
15.22 $
17.17 $
17.37 $
24.17
24.17
24.17
24.17
24.17
122,100
35,556
(8,987)
(12,306)
597,757
$
2,856
$ 1,604
$
4,460
Balance at January 1, 2023
SARs proportionately recognized
724,908
$
17.37 $
22.18
597,757
in the year from grants awarded
in previous years
SARs granted August 14, 2023
SARs redeemed
SARs forfeited
Balance at
December 31, 2023
$
–
78,270
$
(40,448) $
(21,941) $
– $
24.64 $
16.45 $
21.14 $
22.18
22.18
22.18
22.18
86,793
15,496
(40,448)
(14,413)
740,789
$ 18.08 $
22.18
645,185
$
2,924
$
509 $ 3,433
1 Included within accounts payable and accrued liabilities on the consolidated statements of financial position.
2 Included within other non-current liabilities on the consolidated statements of financial position.
Fully Vested Units:
Balance at December 31, 2022
Balance at December 31, 2023
A summary of the ending balance of the SAR plan for the years ended December 31, 2023 and 2022, is as follows:
(thousands of CAD, except number
of units and per unit prices)
Granted November 18, 2019
Granted March 26, 2020
Granted March 25, 2021
Granted March 24, 2022
Granted August 14, 2023
Balance at December 31, 2023
(thousands of CAD, except number
of units and per unit prices)
Granted November 18, 2019
Granted March 26, 2020
Granted March 25, 2021
Granted March 24, 2022
Balance at December 31, 2022
Total Number
of Units
214,590
255,334
117,095
80,524
73,246
740,789
Total Number
of Units
230,742
277,983
127,773
88,410
724,908
Number of
Units Accrued
214,590
251,576
105,770
58,748
14,501
645,185
Number of
Units Accrued
217,968
251,136
93,097
35,556
597,757
Grant
Price
16.11
13.71
23.86
22.81
24.64
Grant
Price
16.11
13.71
23.86
22.81
$
$
$
$
$
$
$
$
$
End of Year
Share Price
22.18
$
22.18
$
22.18
$
22.18
$
22.18
$
End of Year
Share Price
24.17
$
24.17
$
24.17
$
24.17
$
Units Vested
343,716
484,769
Total
Liability
1,302
2,131
–
–
–
3,433
Total
Liability
1,757
2,627
28
48
4,460
$
$
$
$
$
$
$
$
$
$
$
92
2023 ISC® Annual Report | Notes to the Consolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Deferred share units
The Company has established a DSU plan to provide directors of ISC with the opportunity to participate in the long-term success of ISC and
to promote a greater alignment of interests between its directors and shareholders. The Board may award DSUs at its discretion, from time
to time, in accordance with the plan and upon such other terms and conditions as the Board may prescribe. DSU awards vest according to
the vesting schedule approved by the Board at the time of the award.
DSUs earn dividend equivalent units in the form of additional DSUs at the same rate as dividends on Class A Shares. The participant is not
allowed to redeem the DSUs until termination of employment/directorship or death. The cash value of the DSUs is equivalent to the market
value of the Class A Shares when redemption takes place.
On each applicable redemption date, the Company delivers to each participant a cash payment equal to the redemption value of the DSUs,
or an equivalent number of Class A Shares purchased on the TSX. A summary of the status of the DSU plan and the changes within the
years ended December 31, 2023 and 2022, is as follows:
(thousands of CAD, except number of units)
Units
Units Recognized
Balance at January 1, 2022
Units proportionally recognized in the current period, from previous grants
DSUs granted June 10, 2022
DSUs credited as a result of cash dividends paid
DSUs redeemed
DSUs forfeited
Balance at December 31, 2022
Balance at January 1, 2023
Units proportionally recognized in the current period, from previous grants
DSUs granted August 8, 2023
DSUs credited as a result of cash dividends paid
DSUs redeemed
DSUs forfeited
Balance at December 31, 2023
143,143
–
19,603
5,702
(22,411)
(324)
145,713
145,713
–
16,840
6,462
–
–
169,015
1 Included within accounts payable and accrued liabilities on the consolidated statements of financial position.
142,564
579
18,364
5,702
(22,411)
(324)
144,474
144,474
1,239
15,947
6,462
–
–
168,122
Fully Vested Units:
Balance at December 31, 2022
Balance at December 31, 2023
Short-Term
Liability1
$
3,492
$ 3,729
Units Vested
140,604
164,717
The fair value of the DSUs at December 31, 2023, has been calculated using the market value of the Company’s Class A Shares on the TSX.
Stock options
The Company established a stock option plan approved by shareholders in 2014 and subsequently amended and restated at various points.
The exercise price of options issued under the stock option plan is determined by the Board at the time of the grant but shall not be less
than the closing price for the Class A Shares on the TSX on the trading day immediately preceding the date of the grant.
Unless the Board determines otherwise, options granted will vest and become exercisable in equal tranches over the four years following
the date of the grant. Once vested, options may be exercised at any time within eight years of the date of the grant, after which they expire
and terminate.
93
2023 ISC® Annual Report | Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements | 2023 ISC® Annual ReportFor the Fourth Quarter and Year Ended December 31, 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
A summary of the status of the stock option plan and the changes within the years ended December 31, 2023 and 2022, is as follows:
2023 2022
Outstanding, beginning of year
Stock options exercised1
Stock options forfeited
Outstanding, end of year
Vested and exercisable, end of year
Weighted Average
Weighted Average
Units
1,332,017
(326,819)
–
1,005,198
1,005,198
Exercise Price
17.35
15.21
–
18.04
$
$
$
$
Units
1,548,247
(201,498)
(14,732)
1,332,017
1,332,017
Exercise Price
17.27
16.68
17.85
17.35
$
$
$
$
1 During the period a portion of the 326,819 options exercised were settled net, which resulted in the aggregate issuance of 303,143 shares from treasury.
The number of options outstanding by grant date as of December 31, 2023, is shown in the following table:
Options Outstanding Options Exercisable
Weighted
Average
Remaining
Contractual Years
0.6
1.4
2.4
1.6
Weighted
Average
Exercise
Price
$
17.40
$
18.85
17.85
$
$ 18.04
Weighted
Average
Exercise
Price
17.40
18.85
17.85
18.04
Units
Outstanding
275,141
317,341
412,716
1,005,198
Units
Outstanding
275,141
317,341
412,716
1,005,198
Expiry Date
Aug 12, 2024
May 17, 2025
May 16, 2026
Grant Date
Aug 12, 2016
May 17, 2017
May 16, 2018
$
$
$
$
The number of options outstanding by grant date as of December 31, 2022, is shown in the following table:
Options Outstanding Options Exercisable
Grant Date
Aug 12, 2015
Aug 12, 2016
May 17, 2017
May 16, 2018
Expiry Date
Aug 12, 2023
Aug 12, 2024
May 17, 2025
May 16, 2026
Weighted
Average
Remaining
Contractual Years
0.6
1.6
2.4
3.4
2.1
Weighted
Average
Exercise
Price
15.04
17.40
18.85
17.85
17.35
$
$
$
$
$
Units
Outstanding
303,451
298,509
317,341
412,716
1,332,017
Weighted
Average
Exercise
Price
15.04
17.40
18.85
17.85
17.35
$
$
$
$
$
Units
Outstanding
303,451
298,509
317,341
412,716
1,332,017
The carrying amount of the equity settled employee benefit reserve arising from these stock options as of December 31, 2023, totalled $1.6
million (December 31, 2022 — $2.1 million).
15 Debt
Following the execution of the Extension Agreement, the Company entered into an amended and restated credit agreement (the
“Amended and Restated Credit Facility”) in connection with its secured credit facility (the “Credit Facility”) initially provided by its lenders on
August 5, 2020 and maturing on September 17, 2026. The aggregate amount available under the Amended and Restated Credit Facility has
been increased from $150.0 million to $250.0 million and consists of ISC’s existing $150.0 million revolving credit facility together with a new
$100 million revolving credit facility. In addition, ISC will maintain access to a $100.0 million accordion option, providing the flexibility to
upsize the aggregate revolving credit facility up to $350.0 million. The Amended and Restated Credit Facility has been considered a
modification of debt for accounting purposes.
The Credit Facility bears interest at a base rate of prime, Canadian Dollar Offered Rate (“CDOR”) loans, or letter of credit fee plus a margin
varying between 0.20 per cent and 3.00 per cent per annum (2022 — 0.20 per cent and 2.00 per cent per annum) depending on the type
of advance and the performance on certain covenants.
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2023 ISC® Annual Report | Notes to the Consolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Company is also required to pay a commitment fee quarterly in arrears on the unutilized portion of the Credit Facility, at a rate between
0.24 per cent and 0.60 per cent per annum (2022 — 0.24 per cent and 0.40 per cent per annum) depending on the performance on
certain covenants.
The Company is amortizing transaction costs of $0.8 million attributable to modifying the Credit Facility over the life of the facility, using an
effective interest rate that is currently 7.92 per cent. The amount of financing expense related to these costs and recognized in the
statements of comprehensive income for the year ended December 31, 2023, totalled $0.2 million (2022 — $0.1 million). Details of the debt
outstanding under the Credit Facility are as follows:
(thousands of CAD)
Non-current
Revolving term facility – principal component – beginning of year
Funds drawn from revolving term facility
Principal repayments during the year
Revolving term facility – principal component – end of year
Unamortized costs
Total debt
Financing available under the Credit Facility commitment is as follows:
(thousands of CAD)
Financing available:
Maximum available
Cash drawings – principal component
Letters of credit and other non-cash drawings
Total unused and available portion of the Credit Facility
December 31,
2023
December 31,
2022
$
66,316
150,684
(39,000)
178,000
(698)
177,302
$
$
$
$
$
41,316
40,000
(15,000)
66,316
(269)
66,047
December 31,
2023
December 31,
2022
$
$
250,000
(178,000)
(1,761)
70,239
$ 150,000
(66,316)
–
83,684
$
The Amended and Restated Credit Facility contains financial covenants that require the Company to maintain a ratio of Consolidated Net
Funded Debt to EBITDA, as defined in the agreement, of less than 4.85:1 and EBITDA, as defined in the agreement, to interest expense ratio
of greater than 3:1. The Company was in compliance with all covenants throughout the year.
The indebtedness under the Credit Facility is secured by a first ranking security interest over substantially all of the Company’s assets
(subject to the Government of Saskatchewan’s security under a debenture), including security interests, pledges and guarantees granted by
certain of its subsidiaries.
The amount of borrowing costs capitalized during 2023 and 2022 was nil.
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2023 ISC® Annual Report | Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements | 2023 ISC® Annual ReportFor the Fourth Quarter and Year Ended December 31, 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
16 Vendor Concession Liability
The Extension Agreement outlines the consideration payable for the extension. The Subsequent Payments consist of five cash payments
of $30.0 million per year, totaling $150.0 million, commencing in July 2024 with the final payment expected to be made in 2028. The
Amended and Restated MSA outlines the continuing annual cost contribution payments of $0.5 million, with the next payment due in
March 2024 and the final payment expected to be made in 2053. The payments have been present valued in accordance with IFRS 9
— Financial Instruments.
(thousands of CAD)
Balance, beginning of year
Additions
Accretion
Balance, end of year
The following table presents the contractual undiscounted cash flows for vendor concession liability:
(thousands of CAD)
Year 1
Year 2
Year 3
Year 4
Year 5
Thereafter
Balance, end of year
Unearned interest
Balance, end of year
Reflected as:
Vendor concession liability – current portion
Vendor concession liability – non-current portion
Balance, end of year
$
December 31, 2023
–
124,204
4,332
$ 128,536
$
December 31, 2023
30,500
30,500
30,500
30,500
30,500
12,500
$ 165,000
(36,464)
$ 128,536
20,816
107,720
$ 128,536
17 Liabilities Arising from Financing Activities
The table below provides the reconciliation of movements of liabilities to cash flows arising from financing activities:
As at December 31,
2022
Cash Flows
Non–cash Changes
As at December 31,
2023
Interest payable
Lease obligation including current
portion and interest paid
Long–term debt
Share capital
Dividends payable
$
379
$
(8,533)
8,807
66,047
23,691
4,071
$ 102,995
(2,783)
111,091
4,379
(16,355)
87,799
$
Dividends
Declared
–
$
–
–
–
16,425
$ 16,425
Other
9,450
$
3,840
164
472
–
13,926
$
$
1,296
9,864
177,302
28,542
4,141
$ 221,145
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2023 ISC® Annual Report | Notes to the Consolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at December 31,
2021
Cash Flows
Non-cash Changes
As at December 31,
2022
Interest payable
Lease obligation including current
portion and interest paid
Long–term debt
Short–term debt
Share capital
Dividends payable
$
116
$
(2,902)
9,033
40,975
–
19,955
4,025
$ 74,104
(2,540)
25,000
(500)
3,361
(16,172)
6,247
$
18 Earnings Per Share
Dividends
Declared
–
$
–
–
–
–
16,218
$ 16,218
Other
3,165
$
2,314
72
500
375
–
6,426
$
$
379
8,807
66,047
–
23,691
4,071
$ 102,995
The calculation of earnings per share is based on net income after tax and the weighted average number of shares outstanding during the
year. Details of the earnings per share are set out below:
(thousands of CAD, except number of shares and earnings per share)
Net income
Weighted average number of shares, basic
Potential dilutive shares resulting from stock options
Weighted average number of shares, diluted
Earnings per share ($ per share)
Total, basic
Total, diluted
19 Equity and Capital Management
$
2023
25,045
17,820,729
203,048
18,023,777
Year Ended December 31,
2022
$
30,769
17,598,864
350,629
17,949,493
$
$
1.41
1.39
$
$
1.75
1.71
The Company’s authorized share capital consists of an unlimited number of Class A Shares, one Class B Golden Share (the “Golden Share”)
and an unlimited number of Preferred Shares, issuable in series. The Company currently has 18,004,641 Class A Shares issued and
outstanding, one Golden Share issued and outstanding and no Preferred Shares issued or outstanding. Class A Shares are entitled to one
vote per share. The Golden Share, held by Crown Investments Corporation of Saskatchewan on behalf of the Government of Saskatchewan,
has certain voting rights and obligations including the location of the head office and the sale of certain of the assets of the Company. The
Golden Share has no pre-emptive, redemption, purchase or conversion rights and is not eligible to receive dividends declared by the
Company. The Preferred Shares can be issuable at any time and may include voting rights.
Class A Class B
(thousands of CAD, except number of shares)
Balance at January 1, 2022
Stock options exercised for treasury shares1
Balance at December 31, 2022
Balance at January 1, 2023
Stock options exercised for treasury shares1
Balance at December 31, 2023
Number of Shares
17,500,000
201,498
17,701,498
17,701,498
303,143
18,004,641
Share Capital
19,955
$
3,736
23,691
23,691
4,851
$ 28,542
$
$
Number of Shares
1
–
1
1
–
1
1 See Note 14.
Share Capital
–
$
–
–
–
–
–
$
$
$
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2023 ISC® Annual Report | Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements | 2023 ISC® Annual ReportFor the Fourth Quarter and Year Ended December 31, 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Dividends
The Company paid dividends to shareholders during the year ended December 31, 2023 of $16.4 million (2022 — $16.2 million) based on an
annual dividend rate of $0.92 per share (2022 - $0.92 per share).
Capital management
The Company’s objective in managing capital is to ensure that adequate resources are available to fund organic growth and to enable it
to undertake future growth opportunities while continuing as a going concern. The Company’s capital is composed of debt and
shareholders’ equity.
Operating cash flows are used to provide sustainable cash dividends to shareholders and fund capital expenditures in support of organic
growth. In addition, operating cash flows, supplemented throughout the year with the operating facility if necessary, are used to fund
working capital requirements.
Equity and the available but undrawn portion of the term facility will assist in financing future growth opportunities.
The Company’s capital at December 31, 2023, consists of long-term debt, share capital, accumulated other comprehensive income, equity
settled employee benefit reserve and retained earnings (comprising total shareholders’ equity).
(thousands of CAD)
Long-term debt
Share capital
Accumulated other comprehensive income
Equity settled employee benefit reserve
Retained earnings
Capitalization
$
December 31,
2023
177,302
28,542
(185)
1,610
138,812
346,081
$
$
December 31,
2022
66,047
23,691
(377)
2,082
130,192
$ 221,635
20 Financial Instruments and Related Risk Management
The Company does not currently use any form of derivative financial instruments to manage its exposure to credit risk, interest rate risk,
market risk or foreign currency exchange risk.
Credit risk
Credit risk is the risk that one party to a transaction will fail to discharge an obligation and cause the other party to incur a financial loss. The
Company extends credit to its customers in the normal course of business and is exposed to credit risk in the event of non-performance by
customers, but does not anticipate such non-performance would be material. The Company monitors the credit risk and credit rating of
customers on a regular basis. The Company has significant concentration of credit risk among government sectors. Its customers are
predominantly provincial, federal, and municipal government ministries and agencies and its private sector customers are diverse.
The majority of cash is held with Canadian chartered banks and the Company believes the risk of loss to be minimal. The maximum
exposure to credit risk at December 31, 2023, is $39.9 million (December 31, 2022 — $49.4 million), equal to the carrying value of the
Company’s financial assets, which are itemized in the table below. Quarterly reviews of the aged receivables are completed. The Company
expects to fully collect the carrying value on all outstanding receivables. Therefore, the risk to the Company is low.
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2023 ISC® Annual Report | Notes to the Consolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The following table sets out details of cash and ageing of receivables:
(thousands of CAD)
Cash
Trade and other receivables:
- current
- up to three months past due date
- greater than three months past due date
Total credit risk
Interest rate risk
December 31,
2023
24,193
$
December 31,
2022
34,479
$
14,160
694
819
39,866
$
12,662
1,342
929
49,412
$
Interest rate risk arises from the effect of changes in prevailing interest rates on the Company’s financial instruments.
The Company is subject to interest rate risks on its debt (Note 15). The Company has borrowings under the Credit Facility, which is managed
with prime loans, CDOR loans, or letters of credit. Certain borrowings will bear interest at a base rate of prime plus applicable margin varying
between 0.20 per cent and 3.00 per cent per annum while other borrowings will bear interest at CDOR rates between 1.20 per cent and
3.00 per cent per annum. The Company is managing its interest rate risk through its treasury function, the continued focus on debt
repayment and keeping excess cash in higher interest short-term savings.
The following table presents a sensitivity analysis to changes in market interest rates and their potential impact on the Company for the
years ended December 31, 2023 and 2022. As the sensitivity is hypothetical, it should be used with caution.
(thousands of CAD)
December 31, 2023
December 31, 2022
+ 100 bps*
– 100 bps
+ 100 bps
– 100 bps
Increase (decrease) in interest expense
Decrease (increase) in net income before tax
Decrease (increase) in total comprehensive income
$ 1,149
$ 1,149
$ 839
$ (1,149)
$ (1,149)
(839)
$
$
$
$
641
641
468
$
$
$
(641)
(641)
(468)
* bps = basis point spread
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s cash resources are
managed based on financial forecasts and anticipated cash flows.
The following summarizes the contractual maturities for the Company’s financial liabilities at December 31, 2023:
(thousands of CAD)
Long-term debt
Vendor concession liability
Lease obligations
Accounts payable and accrued liabilities
Total liabilities
Carrying
Amount
$ 177,302
128,536
9,864
36,114
$ 351,816
Contractual
Cash Flows
$ 216,216
165,000
11,300
36,114
$ 428,630
$
0-6
Months
7,022
500
1,647
36,114
$ 45,283
7-12
Months
$
7,098
30,000
1,646
–
$ 38,744
12+
Months
$ 202,096
134,500
8,007
–
$ 344,603
Contractual cash flows for long-term debt and lease obligations include principal and interest.
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2023 ISC® Annual Report | Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements | 2023 ISC® Annual ReportFor the Fourth Quarter and Year Ended December 31, 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Market risk
The carrying amount and fair value of the financial assets and financial liabilities are as follows:
Classification
Level
December 31, 2023
December 31, 2022
Carrying
Amount
Fair Value
Carrying
Amount
Fair Value
AC
AC
AC
AC
AC
$ 24,193
15,673
$ 24,193
15,673
$ 34,479
14,933
$ 34,479
14,933
28,324
128,536
177,302
28,324
124,329
176,061
25,727
–
66,047
25,727
–
66,192
(thousands of CAD)
Financial assets
Cash
Trade and other receivables
Financial liabilities
Accounts payable and accrued
liabilities excluding share-based
accrued liabilities
Vendor concession liability
Long-term debt
Fair value of financial instruments
The carrying values of cash, trade and other receivables, accounts payable and accrued liabilities excluding share-based accrued liabilities
approximate fair value due to their immediate or relatively short-term maturity. The fair values of the vendor concession liability and
long-term debt are estimated by discounting the future contractual cash flows at the cost of borrowing to the Company.
Foreign currency exchange risk
The Company operates internationally and is exposed to fluctuations in various currencies, with the euro being the most material, followed
by the US dollar. Movements in foreign currencies against the Canadian dollar may impact revenue, the value of assets and liabilities and
affect the Company’s profit and loss.
Based on the balance of foreign net monetary assets and net assets carried on the consolidated statements of financial position, the impact
of an increase (decrease) of 10.0 per cent in the euro relative to the Canadian dollar as at December 31, 2023, on net monetary assets was a
decrease (increase) of $0.2 million (December 31, 2022 — $0.3 million) and on net assets was an increase (decrease) of $1.2 million
(December 31, 2022 — $1.1 million). The impact of an increase (decrease) of 10.0 per cent in the US dollar relative to the Canadian dollar as at
December 31, 2023, on net monetary assets was a decrease (increase) of $0.1 million (December 31, 2022 — $0.3 million). The Company’s
exposure to other currencies was not significant at the end of the year.
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2023 ISC® Annual Report | Notes to the Consolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
21 Revenue
The Company derives its revenue from the transfer of goods or services either at a point in time or over time. This is consistent with the
revenue from third party information disclosed for each reportable segment under IFRS 8 — Operating Segments (see Note 25). The
following table presents our third-party revenue disaggregated by revenue type. Sales and usage tax are excluded from revenue.
Segment revenue
(thousands of CAD)
Registry Operations
Services
Technology Solutions
Corporate and other
Total revenue
The following table presents our revenue disaggregated by the timing of revenue recognition:
Timing of revenue recognition
(thousands of CAD)
At a point in time
Registry Operations revenue
Services revenue
Corporate and other
Over time
Registry Operations revenue
Services revenue
Technology Solutions revenue
Total revenue
Year Ended December 31,
2022
2023
$ 103,516
101,712
9,268
24
$ 214,520
$ 91,721
92,306
5,849
19
$ 189,895
Year Ended December 31,
2022
2023
$ 84,922
100,086
24
$ 185,032
18,594
1,626
9,268
$ 29,488
$ 214,520
$ 79,313
90,811
19
$ 170,143
12,408
1,495
5,849
$ 19,752
$ 189,895
In the “over time” category, some Land Registry and Corporate Registry contracts result in linear revenue recognition over the life of the
contract. In Services, Recovery Solutions administration fee revenue is also recognized over the life of the asset recovery and accounts
receivable management file. Likewise, the hosting, support and maintenance portion of contracts related to Technology Solutions revenue
primarily results in linear revenue recognition over the life of the contract. Conversely, revenue recognition associated with the licence and
solution definition and implementation portion of contracts depends on milestone achievement or percentage of completion. In 2023, the
portion of Technology Solutions contract revenue recognized that was dependent on milestone achievement or percentage of completion
versus total revenue recognized was 44.0 per cent (2022 — 16.0 per cent). At December 31, 2023, the Company has contracts where the
milestone was either in progress or expected to be satisfied in the near term. For the unsatisfied portion of contracts dependent on
milestone achievement or percentage of completion, the Company expects that 86.7 per cent (2022 — 76.4 per cent) of the total will be
recognized in the next fiscal year.
Registry Operations service concession arrangement
In 2022, the Company agreed to a change pursuant to its MSA with the Government of Saskatchewan to prepare for certain updates to the
Corporate Registry to support changes to legislation. Under the MSA, the Company owns the intellectual property during the term of the MSA.
As at December 31, 2023, the development associated with the change order is 100.0 per cent complete (2022 — 71.4 per cent) and an
incremental $0.6 million increase to both intangible assets and other revenue was recorded in 2023 in Registry Operations related to the
project (2022 — $1.0 million). The intangible asset was put into use and depreciation commenced in the first quarter of 2023.
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2023 ISC® Annual Report | Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements | 2023 ISC® Annual ReportFor the Fourth Quarter and Year Ended December 31, 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
22 Interest Expense
(thousands of CAD)
Interest expense on long-term debt
Vendor concession liability accretion
Interest on lease liabilities interest
Effective interest component of interest expense
Total interest expense
23 Related Party Transactions
Year Ended December 31,
2022
2023
$
9,449
4,332
400
165
$ 14,346
$
$
3,165
–
403
72
3,640
Included in these consolidated financial statements are transactions with various Saskatchewan Crown corporations, ministries, agencies,
boards and commissions related to the Company by virtue of common control by the Government of Saskatchewan and non-Crown
corporations and enterprises subject to joint control and significant influence by the Government of Saskatchewan (collectively referred to
as “related parties”). The Company has elected to take the exemption under IAS 24 — Related Party Disclosures, which allows government-
related entities to limit the extent of disclosures about related party transactions with government or other government-related entities.
Routine operating transactions with related parties are settled at agreed-upon exchange amounts under normal trade terms. In addition,
the Company pays provincial sales tax to the Saskatchewan Ministry of Finance on all its taxable purchases. Taxes paid are recorded as part
of the cost of those purchases. Other amounts and transactions due to and from related parties and the terms of settlement are described
separately in these consolidated financial statements and the Notes thereto.
24 Compensation of Key Management Personnel
Key management personnel includes the directors, President and Chief Executive Officer, Chief Financial Officer, Executive Vice-Presidents,
Vice-Presidents, President, ESC and Head of ERS. The compensation of the key management team during the year was as follows:
(thousands of CAD)
Wages, salaries and short-term benefits
Share-based compensation
Defined contribution pension plans
Termination benefits
Total compensation
Year Ended December 31,
2022
2023
$
$
4,298
283
229
–
4,810
$
$
4,005
1,482
214
242
5,943
The compensation of directors and the President and Chief Executive Officer is determined by the Board upon recommendation of its
Compensation Committee having regard to the performance of individuals and market trends. The values in the table above represent
amounts included in expenses during the year. Portions not paid in cash have been accrued as liabilities on the statement of financial position.
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2023 ISC® Annual Report | Notes to the Consolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
25 Segment Information
The Chief Executive Officer of the Company is the chief operating decision maker (“CODM”) and regularly reviews the operations and
performance by segment. Due to the evolution of the business over the last two years, the CODM now uses adjusted earnings before
interest, taxes, depreciation and amortization (“adjusted EBITDA”) to measure and assess each segment’s performance and make decisions
about the allocation of resources to the operating segments, as adjusted EBITDA helps to provide a better understanding about the
performance of the Company by removing the impact of share-based compensation, acquisition, integration and other costs. The CODM
considers adjusted EBITDA to be a meaningful measure because it is not impacted by long-term investment and financing decisions, but
rather focuses on the performance of our day-to-day operations.
ISC has three reportable segments – Registry Operations, Services, and Technology Solutions, summarized as follows:
• Registry Operations delivers registry and information services on behalf of governments and private sector organizations;
• Services delivers products and services that utilize public records and data to provide value to customers in the financial and
legal sectors; and
• Technology Solutions provides the development, delivery and support of registry (and related) technology solutions.
Corporate and other includes our corporate activities and shared services functions. The Registry Operations and Services segments
operate substantially in Canada. The Technology Solutions segment operates both in Canada and Ireland.
Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. We account for
transactions between reportable segments in the same way we account for transactions with external parties; however, we eliminate them
on consolidation.
Revenue and EBIT
For the year ended December 31, 2023
(thousands of CAD)
Revenue from third parties
Plus: inter–segment revenue
Total revenue
Total expenses including
net finance expense
Income (loss) before tax
Net finance expense
EBIT1
Depreciation and amortization
EBITDA2
Share–based compensation recovery
Acquisition, integration and
other costs
Adjusted EBITDA
Registry
Operations
$ 103,516
–
$ 103,516
(56,321)
47,195
–
47,195
8,085
55,280
167
3,477
$ 58,924
Services
$ 101,712
–
$ 101,712
$
Technology
Solutions
9,268
13,906
$ 23,174
Corporate
and Other
24
150
174
$
$
$
Inter-Segment
Eliminations
–
(14,056)
(14,056)
$
(90,753)
10,959
–
10,959
10,084
21,043
20
(23,659)
(485)
–
(485)
1,283
798
28
(23,053)
(22,879)
13,183
(9,696)
1,054
(8,642)
68
14,056
–
–
–
–
–
–
Consolidated
Total
$ 214,520
–
$ 214,520
(179,730)
34,790
13,183
47,973
20,506
68,479
283
–
21,063
$
$
–
826
$
2,094
(6,480)
$
(1,467)
(1,467)
4,104
$ 72,866
Additions to non–current assets,
including acquisitions
$ 278,998
$
4,155
$
1,067
$
431
$
–
$ 284,651
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2023 ISC® Annual Report | Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements | 2023 ISC® Annual ReportFor the Fourth Quarter and Year Ended December 31, 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended December 31, 2022
$
$
(thousands of CAD)
Revenue from third parties
Plus: inter–segment revenue
Total revenue
Total expenses including net
finance expense
Income (loss) before tax
Net finance expense
EBIT1
Depreciation and amortization
EBITDA2
Share–based compensation recovery
Acquisition, integration and
other costs
Adjusted EBITDA
$
Registry
Operations
91,721
–
91,721
$
$
(43,656)
48,065
–
48,065
2,828
50,893
875
Services
92,306
–
92,306
(83,356)
8,950
–
8,950
9,645
18,595
104
Technology
Solutions
5,849
10,168
16,017
$
$
Corporate
and Other
19
145
164
$
$
$
Inter-Segment
Eliminations
–
(10,313)
(10,313)
$
(18,588)
(2,571)
–
(2,571)
1,191
(1,380)
148
(11,590)
(11,426)
3,177
(8,249)
1,071
(7,178)
356
10,313
–
–
–
–
–
–
Consolidated
Total
$ 189,895
–
$ 189,895
(146,877)
43,018
3,177
46,195
14,735
60,930
1,483
291
52,059
$
262
18,961
$
–
(1,232)
$
1,424
(5,398)
$
–
–
1,977
64,390
$
Additions to non–current assets,
including acquisitions
$
54,215
$
11,087
$
797
$
701
$
–
$
66,800
1 EBIT is calculated as income before net finance expense and income tax expense.
2 EBITDA is calculated as income before depreciation and amortization, net finance expense and income tax expense.
Inter-segment revenues are charged among segments at arm’s-length rates, based on rates charged to third parties. Total consolidated
revenue is attributed to customers within Ireland and Canada. For the year ended December 31, 2023, revenue within Ireland was $12.1
million (2022 — $5.0 million) and the remainder was in Canada. No single customer represented more than 10.0 per cent of the total
consolidated revenue.
Assets and liabilities
As at December 31, 2023
(thousands of CAD)
Assets
Total assets, excluding
Registry
Operations
Services
Technology
Solutions
Corporate
and Other
Inter-Segment
Eliminations
Consolidated
Total
intangibles, goodwill and cash $ 23,281
303,548
Intangibles
21,098
–
$ 347,927
$ 146,845
Goodwill
Cash
Total assets
Liabilities
$
17,812
42,322
71,537
–
$ 131,671
$ 16,584
$
5,843
4,874
8,631
–
$ 19,348
7,885
$
$
12,158
1,026
–
24,193
$
37,377
$ 196,230
$
$
$
–
–
–
–
–
–
$ 59,094
351,770
101,266
24,193
$ 536,323
$ 367,544
As at December 31, 2022
(thousands of CAD)
Assets
Total assets, excluding
intangibles, goodwill and cash $
Intangibles
Goodwill
Cash
Total assets
Liabilities
$
$
Registry
Operations
Services
Technology
Solutions
Corporate
and Other
Inter–Segment
Eliminations
Consolidated
Total
23,667
32,301
21,098
–
77,066
19,093
$
$
$
15,838
51,383
71,537
–
138,758
15,430
$
$
$
4,408
4,638
8,605
–
17,651
6,432
$
$
$
14,829
671
–
34,479
49,979
86,911
$
$
$
–
–
–
–
–
–
$
58,742
88,993
101,240
34,479
$ 283,454
$ 127,866
Non-current assets are held in Canada, Ireland and Luxembourg. At December 31, 2023, the value of non-current assets, excluding deferred
tax assets, held in Ireland and Luxembourg was collectively $11.5 million (December 31, 2022 — $11.0 million), while the remainder was held
in Canada.
104
2023 ISC® Annual Report | Notes to the Consolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
26 Net Change in Non-Cash Working Capital
The net change during the year comprised the following:
(thousands of CAD)
Trade and other receivables
Prepaid expenses
Contract assets
Accounts payable and accrued liabilities
Contract liabilities
Provisions and other liabilities
Income taxes
Net change in non-cash working capital
Year Ended December 31,
2022
2023
$
$
(774)
1,411
(1,671)
1,014
41
(1,088)
(149)
(1,216)
$
$
337
(1,134)
(101)
6,016
1,161
(1,824)
(8,292)
(3,837)
Income taxes paid, net of refunds received, for the year ended December 31, 2023, totalled $10.0 million (2022 — $20.7 million).
27 Acquisitions
No acquisitions were completed in 2023. In 2022, the Company completed three acquisitions: the UPLevel group of companies
(collectively, “UPLevel”), Reamined and Regulis. Management’s assessment of each acquisition under IFRS 3 — Business Combinations
concluded that the acquisitions of Reamined and UPLevel were both business combinations whereas the acquisition of Regulis did not
meet the definition of a business and as such, was treated as an asset acquisition.
A table outlining the net cash flow related to each acquisition is provided below, followed by a table providing the allocation of the purchase
price for accounting purposes:
Asset
Net cash flows related to the acquisition Business Combinations Acquisition
(thousands of CAD)
Total
Date acquired
Consideration paid in cash
Working capital and other post-closing adjustments
Debt assumed
Transaction costs
Total consideration
Non cash deemed settlement of debt after close
Items not yet paid in cash:
Working capital and other post-closing adjustments
not yet cash settled at December 31, 20221
Net cash flows related to the acquisition
Less cash balance acquired
Acquisition (net of cash acquired)
Made up of:
Acquisition through business combination
(net of cash acquired)
Acquisition through asset acquisition
(net of cash acquired)
$
$
$
$
1 Total balance of $226 thousand was cash settled during 2023.
$
UPLevel
February 14,
2022
9,000
458
(1,001)
–
8,457
1,001
$
Reamined
June 1,
2022
$ 45,900
65
–
–
$ 45,965
–
$
Regulis
December 20,
2022
564
–
–
129
693
–
$
–
693
41
652
(71)
9,387
248
9,139
(155)
$ 45,810
930
$ 44,880
9,139
$ 44,880
–
$
–
$
$
$
$
$ 55,464
523
(1,001)
129
$ 55,115
1,001
(226)
$ 55,890
1,219
$ 54,671
–
$ 54,019
652
$
652
105
2023 ISC® Annual Report | Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements | 2023 ISC® Annual ReportFor the Fourth Quarter and Year Ended December 31, 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The table below presents the finalized allocation of the net purchase price for accounting purposes for the UPLevel, Reamined, and
Regulis acquisitions:
Asset
Business Combinations Acquisition
UPLevel
Reamined
Regulis
Total
(thousands of CAD)
Assets
Cash
Trade and other receivables
Income tax recoverable
Prepaid expenses and deposits
Property, plant and equipment
Right–of–use assets
Intangible assets
Liabilities
Accounts payable and accrued liabilities
Short–term debt
Long–term debt – current portion
Lease obligations – current portion
Lease obligations
Deferred tax liability
Net assets acquired
Goodwill arising on acquisition
Total consideration allocated
Net assets acquired
Total goodwill arising on acquisition
$
$
$
$
$
248
1,049
37
126
108
189
5,420
7,177
328
–
1,001
83
106
1,367
2,885
4,292
8,457
4,292
4,165
$
930
1,481
155
679
485
1,094
31,723
$ 36,547
418
500
–
288
806
8,468
$ 10,480
$ 26,067
45,965
26,067
$ 19,898
$
$
$
$
$
41
11
–
2
–
–
651
705
12
–
–
–
–
–
12
693
693
693
–
28 Commitments and Contingencies
As of December 31, 2023, the Company has commitments over the next five years as follows:
(thousands of CAD)
2024
2025
2026
2027
2028
Thereafter
Total commitments
IT and Other
Service
Agreements1
6,972
$
3,749
3,621
3,526
3,154
–
$ 21,022
Operating Leases
and Non-Lease
Component of
Office Leases
1,830
$
1,053
763
704
642
512
5,504
$
1 Includes minimum lease commitments for low-value assets not recognized under IFRS 16.
106
$
1,219
2,541
192
807
593
1,283
37,794
$ 44,429
758
500
1,001
371
912
9,835
$ 13,377
$ 31,052
55,115
31,052
$ 24,063
$
Total
8,802
4,802
4,384
4,230
3,796
512
$ 26,526
2023 ISC® Annual Report | Notes to the Consolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Non-lease component of office leases
The Company leases all of its office space and certain office equipment. The office spaces have lease terms of between three and 10 years,
with various options to extend. The office equipment leases relate to photocopiers and have lease terms of five years. The Company does
not have an option to purchase the leased assets at the expiry of the lease period.
The Company separates the lease and non-lease components of office space, disclosing the lease payment commitments in Note 12.
Contingencies
Management’s estimate of liability for claims and legal actions is based upon claims submitted. As at December 31, 2023, the estimate of
liability was nil (December 31, 2022 — nil).
29 Pension Expense
The total pension costs under the Company’s defined contribution plans for the year were $2.5 million (2022 — $2.1 million).
30 Subsequent Events
On March 12, 2024, the Board declared a quarterly cash dividend of $0.23 per Class A Share, payable on or before April 15, 2024, to
shareholders of record as of March 31, 2024.
107
2023 ISC® Annual Report | Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements | 2023 ISC® Annual ReportFor the Fourth Quarter and Year Ended December 31, 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CORPORATE INFORMATION
BOARD OF DIRECTORS
Joel Douglas Teal
Saskatoon, Saskatchewan
Director since: 2013
Chair of the Board of Directors
Amber Biemans
Humboldt, Saskatchewan
Director since: 2023
Member of the Governance and Nominating Committee
Roger Brandvold
Calgary, Alberta
Director since: 2021
Member of the Audit Committee
Doug Emsley
Regina, Saskatchewan
Director since: 2013
Chair of the Compensation Committee
Tony Guglielmin
Vancouver, British Columbia
Director since: 2013
Member of the Audit Committee
ISC LEADERSHIP
Shawn B. Peters, CPA, CA, ICD.D
President and Chief Executive Officer
Iraj Pourian
Vancouver, British Columbia
Director since: 2016
Member of the Governance and Nominating Committee
Laurie Powers
Kelowna, British Columbia
Director since: 2018
Chair of the Audit Committee
Jim Roche
Ottawa, Ontario
Director since: 2021
Member of the Compensation Committee
Heather Ross
Toronto, Ontario
Director since: 2018
Member of the Compensation Committee
Dion E. Tchorzewski
Regina, Saskatchewan
Director since: 2013
Chair of the Governance and Nominating Committee
Jeffrey Fallowfield
President, ESC Corporate Services Ltd.
Robert (Bob) Antochow, CPA, CA, CMA
Laurel Garven
Chief Financial Officer
Susan Bowman
Head of ERS
Ken Budzak
Executive Vice-President, Registry Operations
Loren Cisyk
Executive Vice-President, Technology Solutions
Vice-President, Corporate Development and
Business Strategy
Kathy E. Hillman-Weir, K.C.
Executive Vice-President, Chief Corporate Officer, General
Counsel and Corporate Secretary
Catherine McLean
Vice-President, People and Culture
108
2023 ISC® Annual Report
CORPORATE INFORMATION
CORPORATE INFORMATION
Head Office
Suite 300 — 10 Research Drive
Regina, Saskatchewan S4S 7J7 Canada
Stock Exchange Listing and Symbol
Toronto Stock Exchange: ISV
Share Capital
Authorized — the Company’s authorized share capital consists
of an unlimited number of Class A Limited Voting Shares
(“Class A Shares”), one Class B Golden Share (“Golden Share”)
and an unlimited number of Preferred Shares.
Class A Limited Voting Shares
Issued and outstanding — 18,004,641 Class A Shares as at
December 31, 2023.
The Company’s articles and the ISC Act limit ownership of
Class A Shares, including joint ownership, to no more than
15 per cent of the Class A Shares issued and outstanding.
Class B Golden Share
Issued and outstanding — 1 Golden Share as at
December 31, 2023.
The Golden Share held by the Government of Saskatchewan
has certain voting rights with respect to the location of the
head office and the sale of all or substantially all of the assets
of the Company.
The Golden Share has no pre-emptive, redemption, purchase
or conversion rights and is not eligible to receive dividends
declared by the Company.
Preferred Shares
Issued and outstanding — Nil as at December 31, 2023.
Ownership
As of March 12, 2024, the Board and management are not
aware of any shareholder who directly or indirectly owns or
exercises, or directs control over, more than 10 per cent of our
Class A Shares, other than:
a) Crown Investments Corporation of Saskatchewan (“CIC”),
which holds 5,425,000 Class A Shares representing
30.1 per cent of the issued and outstanding Class A Shares;
b) CI Investments Inc., which holds 2,453,176 Class A Shares
representing approximately 13.6 per cent of the issued and
outstanding Class A Shares; and
c) QV Investors Inc., which holds 2,215,105 Class A Shares
representing 12.3 per cent of the issued and outstanding
Class A Shares.
Auditors
Deloitte LLP
Suite 900 — 2103 11th Avenue
Regina, Saskatchewan S4P 3Z8 Canada
Transfer Agent
TSX Trust Company
For inquiries related to shares, dividends, and changes
of address:
Toll-free inside North America: 1-800-387-0825
www.tsxtrust.com
shareholderinquiries@tmx.com
Regulatory Filings
The Company’s filings are available through the System for
Electronic Document Analysis and Retrieval (SEDAR+) at
www.sedarplus.ca.
Preferred Shares are issuable at any time and may include
voting rights.
Investor Contact Information
Jonathan Hackshaw
Senior Director, Investor Relations & Capital Markets
Toll-free in North America: 1-855-341-8363
Outside North America: 1-306-798-1137
investor.relations@isc.ca
109
2023 ISC® Annual Report CORPORATE INFORMATION
Dividends on Class A Shares
Our objective is to achieve dividend growth over time while balancing our strategic business priorities. The payment of dividends
is not guaranteed and the amount and timing of any dividends payable by the Company will be at the discretion of the Board and
will be established based on our cash available for distribution, our financial requirements, any restrictions imposed by our credit
facilities, the requirements of any future financings and other factors existing at the time. The table below shows annual dividends
per Class A Share that have been declared by the Board for the last three years:
Year
2023
2023
2023
2023
2022
2022
2022
2022
2021
2021
2021
2021
Type
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Ex-Dividend Date
Dec 28, 2023
Sep 28, 2023
Jun 29, 2023
Mar 30, 2023
Dec 29, 2022
Sep 29, 2022
Jun 29, 2022
Mar 30, 2022
Dec 30, 2021
Sep 28, 2021
Jun 29, 2021
Mar 30, 2021
Record Date
Dec 31, 2023
Sep 30, 2023
June 30, 2023
Mar 31, 2023
Dec 31, 2022
Sep 30, 2022
June 30, 2022
Mar 31, 2022
Dec 31, 2021
Sep 30, 2021
Jun 30, 2021
Mar 31, 2021
Payable Date
Amount
Jan 15, 2024
Oct 15, 2023
Jul 15, 2023
Apr 15, 2023
Jan 15, 2023
Oct 15, 2022
Jul 15, 2022
Apr 15, 2022
Jan 15, 2022
Oct 15, 2021
Jul 15, 2021
Apr 15, 2021
$0.23
$0.23
$0.23
$0.23
$0.23
$0.23
$0.23
$0.23
$0.23
$0.20
$0.20
$0.20
Dividends are eligible dividends pursuant to the Income Tax Act (Canada) as amended. An eligible dividend paid to a Canadian
resident is entitled to the enhanced dividend tax credit. For further information on tax implications, please consult a tax advisor.
Non-IFRS Financial Measures
This report also includes certain measures that have not been prepared in accordance with International Financial Reporting
Standards (“IFRS”), such as EBITDA, EBITDA margin, adjusted EBITDA, adjusted EBITDA margin and free cash flow. Rather, these
measures are provided as additional information to complement those IFRS measures. Refer to Section 8.8 “Non-IFRS financial
measures” in ISC’s Management’s Discussion and Analysis for the fourth quarter and year ended December 31, 2023 (“MD&A”),
included herein and filed on SEDAR+ at www.sedarplus.ca, for discussion of why we use these measures and their most closely
related IFRS measures within the Financial Statements. Refer to Section 2 “Consolidated Financial Analysis” of the MD&A for a
reconciliation of EBITDA and adjusted EBITDA to net income and Section 6.1 “Cash flow” of the MD&A for a reconciliation of free
cash flow.
Cautionary Note Regarding Forward-Looking Information
This report contains forward-looking information within the meaning of applicable Canadian securities legislation including, without
limitation, statements related to the industries in which we operate, growth opportunities, and our future financial position and
results, including expected revenue, EBITDA margin and EBITDA. Forward-looking information involves known and unknown risks,
uncertainties and other factors that may cause actual results or events to differ materially from those expressed or implied by such
forward-looking information. Important factors that could cause actual results to differ materially from the Company’s plans or
expectations include risks relating to changes in the condition of the economy, including those arising from public health concerns,
reliance on key customers and licences, dependence on key projects and clients, securing new business and fixed-price contracts,
identification of viable growth opportunities, implementation of our growth strategy, competition, and other risks detailed from time
to time in the filings made by the Company, including those detailed in ISC’s Annual Information Form for the year ended December
31, 2023, and ISC’s audited Consolidated Financial Statements and Notes and Management’s Discussion and Analysis for the fourth
quarter and year ended December 31, 2023, included herein, copies of which are filed on SEDAR+ at www.sedarplus.ca. The
forward-looking information in this report is made as of the date hereof and, except as required under applicable securities laws, ISC
assumes no obligation to update or revise such information to reflect new events or circumstances.
110
2023 ISC® Annual Report
OVERVIEW Information Services Corporation
300 – 10 Research Drive
Regina, Saskatchewan S4S 7J7 Canada
1 (306) 787-8179
isc.ca
TSX:ISV